|The latest BankWest/Mortgage Industry Association of Australia (MIAA) Home Finance survey indicates that if a small interest rate rise was to be announced by the Reserve Bank of Australia most home buyers could manage.|
The Reserve Bank of Australia is scheduled to announce on July 5 the outcome of any decision on interest rates from its board meeting the previous day.
Most buyers, the MIAA says in an article on its website, are comfortably managing their present mortgage payments, but further rate increases of 0,5 percent would make mortgage payments uncomfortable for a quarter of the home-buying public that took part in the survey.
A one percent rate rise would be uncomfortable for 45 per cent of borrowers. More than half the respondents (57,6 percent) agree that they would be either uncomfortable or
very uncomfortable if rates were to rise by 1,5 percent. Women are significantly more uncomfortable than men about managing the impact of interest rate rises.
Chief executive of the MIAA, Phil Naylor, said that this anxiety about possible future rate rises was in direct contrast to the confidence that most home buyers felt about managing their present mortgage payments. “People taking out a mortgage usually expect they will have to make financial sacrifices, but our findings indicate that three quarters of Australia’s home buyers do not feel their repayments are stopping them from doing the things in life that are important to them.
“It is also encouraging that people planning to enter the market in the next year were slightly more comfortable with rate increases, indicating that the threat of a rate rise was not holding them back from buying their first home,” he said.
The research showed 56 percent of borrowers expect rates to be a little higher in the next quarter, but only four percent expect rates to be much higher. Just over a third expect no change.
BankWest’s Head of Broker Sales, Phil Colton said one of the ways that home buyers could create a cushion against future rate rises is to repay more of the loan sooner by either increasing the size of the regular repayment or making more frequent mortgage payments. “Putting a windfall gain such as a tax rebate or bonus into your mortgage has the same effect,” he said.
“So it is interesting that nearly all borrowers (90 percent) in the survey are keen to pay off their loan sooner than the full term and 87 percent have some confidence that they can do so, with 52 percent being very confident.”
“This reinforces the finding that most home buyers are comfortable managing their present level of debt. The keenest to pay off their loan sooner are the younger borrowers who are on higher incomes and are finding mortgage payments easier than expected,” Colton said.