A jump in the cash rate to 1.35 per cent by the Reserve Bank of Australia today is creating the perfect financial storm for Australian families, experts say.
Martin North from Digital Finance Analytics has been tracking mortgage stress in an annual survey of 52,000 Australians for the last two decades.
Mortgage stress is the total of household income and expenditure. If there’s more money going out than coming in, they’re classified as stressed.
“It’s really been concerning, it’s been growing quite substantially,” North told A Current Affair.
“If you go back over 20 years, there were like 15 per cent of households in some difficulty, before COVID, it was just over 30 per cent, But now we’ve got 45 per cent of people with mortgage in difficulty.”
Mother-of-two Tenielle lives in Melbourne’s south-east.
Her neighbourhood is one of the worst for mortgage stress in the country.
“I’ve just turned 40 and I think it really scares me about my kid’s future and how things will look for them, because it doesn’t get any easier,” Tenielle said.
With the help of their mortgage broker, Tenielle and her husband managed to reduce the interest rate on their mortgage from 3.74 per cent to 2.79 per cent in anticipation of today’s rate rise.
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“Purely by changing lenders, it just means more cash in our pocket … will definitely help us with day-to-day living,” she said.
In addition to Victorian hotspots like Melbourne’s south-east, Queensland’s Toowoomba region, Mount Annan in south-western Sydney and Merriwa in coastal Perth round out the areas with the most households likely to be in mortgage stress.
Eddy Rey lives in the same area as Tenille and is worried about how much the banks will hike up interest rates after today’s cash rate announcement.
“The banks love to kick it up as quick as they can,” he said.
To meet his mortgage repayments, Rey founded a small business called Kiseeke, selling imported coffee beans at farmers markets.
He said if he didn’t have Kiseeke he’d have to find another job on top of his forklift operator shifts during the week.
“I’ve actually worked three jobs at one time [before],” he said.
As Australians like Rey and Tenille consider additional jobs and cutting costs at home, the next cash rate announcement by the Reserve Bank of Australia is scheduled for August 2, 2022.
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