Budget measures won't help those dealing with mortgage stress – analysis

Measures in the budget won't do much to help, experts say

Budget measures won't help those dealing with mortgage stress – analysis

Measures in the federal budget to assist people as prices for food, petrol and other essentials rise won’t be enough for many dealing with mortgage stress, according to experts.

According to data from Digital Finance Analytics, mortgage stress is greatest among “young growing families.” That includes many first-home buyers and those living in the regions, according to an analysis by The Sydney Morning Herald.

Nearly 75% of people in this demographic who have a mortgage – or almost 240,000 households – were under mortgage stress at the end of February, even before petrol prices started to rise, the Herald reported. Overall, nearly half of all households across Australia were under some sort of financial stress at the end of February, 10% higher than before the advent of COVID-19.

Data from Canstar showed that if the cash rate reached 1.75% by March 2024 – as predicted by Westpac – the average variable mortgage rate would hit 4.64%. Monthly repayments on a $1 million loan would be an extra $217 per week, or $11,284 per year.

Steve Mickenbecker, group executive of financial services at Canstar, told the Herald that many households with a mortgage will face severe financial stress when interest rates begin to rise.

“Increasing home loan repayments by more than $200 a week puts the price increases at the supermarket and petrol bowser into the shade,” he said.

Market-watchers have predicted that interest rates are likely to start rising this year, possible as early as June.

Meanwhile, costs are climbing across many categories, including food, petrol, childcare, school fees and council rates, Martin North, founder of Digital Finance Analytics, told the Herald.

There’s also been pressure on housing costs. Following the floods in New South Wales and Queensland, there have been predictions that home insurance premiums will spike more than 10% next financial year as insurers pass the costs on to customers.

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North told the Herald that the measures in the budget to ameliorate cost-of-living pressures – including halving the fuel excise and increasing the Low and Middle Income Tax Offset for the current financial year – will have limited impact.

This may be especially true for those under housing stress. Homebuyers have been obtaining larger mortgages relative to their income, and rising rents are also contributing to financial stress, the Herald reported.

North said he expected cost-of-living pressures to rise as interest rates and variable mortgage rates climb. He also told the Herald that investors with mortgages will be looking to hike rents to cover higher repayments once rates begin to rise.