RBA to add $600 to mortgage repayments
The first signs of widespread mortgage stress are already appearing. Many thousands more people are expected to fall behind with their mortgage in 2010. Many will be first home buyers lured into the market in 2009 by big government grants and record low interest rates.
Economic analysts are expecting big increases in the numbers of people who will lose their home in 2010 because they can’t keep up with repayments.
“Arrears just ticked up slightly in October, but keep in mind that was after just a 0.25 per cent rate increase,” says Vera Chaplin credit analyst with ratings agency Standard & Poor’s.
“Now rates have gone up 0.75 per cent and we have just been through Christmas, so we expect arrears to increase.”
Being in arrears means the borrower is at least 30 days behind in their mortgage repayments.
The Reserve Bank has warned borrowers that it intends raising official interest rates to a ‘neutral’ level of about five per cent. They are now set at 3.75 per cent, with major bank standard variable mortgage rates about 2.5 to 3.0 per cent above that.
If the RBA does continue to raise rates, many mortgagees could face interest rates on their loans of up to eight per cent or more. On a $400,000 loan that could add more than $600 to monthly repayments.
Source: Sunday Mail