{"id":42447,"date":"2023-03-01T18:50:27","date_gmt":"2023-03-01T05:50:27","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=42447"},"modified":"2023-03-01T18:50:27","modified_gmt":"2023-03-01T05:50:27","slug":"housing-crisis-prepare-for-9-per-cent-home-loan-rates","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/housing-crisis-prepare-for-9-per-cent-home-loan-rates\/","title":{"rendered":"HOUSING CRISIS: \u2018Prepare for 9 per cent home loan rates\u2019"},"content":{"rendered":"

PHOTO: Get ready for them Australia. FILE<\/strong><\/p>\n

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Borrowers should be prepared for an average variable rate of close to 9 per cent \u2013 this is the logic behind keeping the current loan assessment buffer in place, according to the head of the Finance Brokers Association of Australia (FBAA).<\/p>\n

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FBAA managing director Peter White has slammed Monday\u2019s move by the Australian Prudential Regulation Authority (APRA) to maintain its current assessment buffer of 3 per cent despite recent hikes bringing the cash rate close to the long term average.<\/p>\n

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\"Mortgage<\/div>\n

Mortgage holders could be trapped in their loan as interest rates rise.<\/strong><\/em><\/div>\n

Mr White said while a 3 per cent buffer made sense when interest rates were at record lows and thus likely to rise significantly, a smaller buffer was more appropriate in the current environment.<\/p>\n

\u201cWe can\u2019t live in the past,\u201d Mr White said.<\/p>\n

\u201cA buffer of 1.5 to 2 per cent is far more appropriate today and in the near future.\u201d<\/p>\n

He questioned whether APRA was potentially \u201csignalling to the market that there is another 3 per cent rise to come.\u201d<\/p>\n

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\u201cThere is no other reason to keep borrowers captive,\u201d he said.<\/p>\n

Canstar puts the average variable interest rate for owner occupiers paying principal and interest at 5.92 per cent.<\/p>\n

A further 3 per cent of interest rate hikes would see this rise to almost 9 per cent.<\/p>\n

This is the amount of interest an existing borrower must now prove they can afford to repay if refinancing to the average variable rate.<\/p>\n

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\"Rising<\/div>\n

Rising rates alongside inflation has made budgeting a challenge.<\/strong><\/em><\/div>\n

If they can\u2019t afford repayments at this rate, they could be stuck paying their current rate even as the cash rate continues to climb.<\/p>\n

\u201cMany borrowers who can afford the interest rate of the day or even a little higher, are being unfairly prevented from refinancing,\u201d Mr White said.<\/p>\n

\u201cMore borrowers are becoming \u2018mortgage prisoners\u2019, locked into a situation where they can\u2019t access a better deal because they don\u2019t meet the inflated assessment rate.\u201d<\/p>\n

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\u201cOthers may be forced into selling their homes because the excessive buffer rate holds them prisoner to their current lender as rates rise.\u201d<\/p>\n

He said the move meant Australian consumers were being penalised as a result of the RBA\u2019s change in direction whereby it hiked rates much earlier and faster than it had previously indicated.<\/p>\n

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