A homeowner with a mortgage of half a million dollars faces a $65 rise in monthly repayments.As mortgages get more expensive, buyers will likely cut back on discretionary spending.Borrowers are set to run the ruler over their discretionary spending after the Reserve Bank on Tuesday kicked off the first round of interest rate rises in a decade.
About a million homeowners had never experienced an increase in the cash rate before the central bank hiked it by 25 basis points to 0.35 per cent on Tuesday in a bid to combat high inflation. Westpac senior economist Matthew Hassan said although most homeowners expect rate rises, the 25 basis point rise from the RBA was a wake-up call and slightly larger than expected.“We know from our own survey of consumer sentiment that most Australians were expecting rates to move higher over the next year,” he said.
He also warned that housing markets were at the beginning of a correction, as rate rises affected borrowing capacity for buyers. Home borrowers who have had their mortgages for years are better prepared than recent buyers. Many who borrowed when interest rates were higher kept their repayments the same as rates fell.
We can now see that the strong economy has little to do with Morrison Government policies. It was a result of record low interest rates and record debt run-up. As both now hit limits we are left up the creek without a paddle. There's your superior economic managers.