No buffer – home buyers exposed when rates increase
New data shows more than 20 per cent of home owners have borrowed six times more than their income.
Low mortgage rates have driven the increased lending in the three-months to June.
Financial regulators have been given permission to address the issue, amid fears of defaults once interest rates begin to rise or people lose their jobs.
Speaking with Oliver Peterson, Nexia Perth director Fran Hughes said the rise in property prices originally fuelled by COVID stimulus packages is causing people to borrow more.
“Couple this with low interest rates, we’re seeing home borrowers take out a larger loan,” she said.
At the current interest rate, repayments are about 35 per cent of a household’s income but Ms Hughes said borrowers are exposed to any increase interest rates.
“Imagine the rates increase to 5 per cent.
“The repayment would be more than half of the household income.”
Ms Hughes recommends mortgage holders pay extra repayments to give a “buffer” when rates start to increase.
Press PLAY to hear more about the crack down on lending: