Welcome to the finance update for the week ending 26 August, 2023.
Recent data indicates that major banks have written over 65% of new loans and secured nearly equal proportions of refinancing work relating to borrowers coming off fixed interest loans. It stands to reason then that smaller lenders have not fared so well, with the same data revealing a decline in their market share in both loan origination and refinancing.
The RBA projected around one million borrowers will shift from fixed to variable rates this year. At around the halfway mark of the transition wave, the major banks have clearly emerged as main beneficiaries of this.
In this week’s newsletter, we have a look at the current state of mortgage arrears, which refers to overdue payment of mortgages, in particular, the current rate or arrears that are 30+ days overdue.
What is the status of mortgage arrears?
The level of mortgage arrears is creeping higher and the number of borrowers at risk of mortgage stress is at its highest level since 2008.
Based on a recent survey of over 10,000 owner-occupier mortgage borrowers, it is estimated that 1.43 million borrowers, or 28.7 per cent, were “at risk” of mortgage stress in June 2023.
That is 539,000 more households than were considered at risk before the RBA started its aggressive string of interest rate rises in May last year.
It is also the equal biggest number considered at risk since 1.46 million in May 2008, just before the global financial crisis (GFC) exploded and the RBA cash rate was slashed from 7.25 per cent to 3 per cent in the space of about half a year, starting in September 2008.
Where is the problem most prominent?
The picture is a most bleak for those living in the outer suburbs of Australia’s major cities, where the greatest number of recent first home buyers are concentrated.
If you have any clients who are concerned about coming off a low fixed rate in the near future, or who are experiencing difficulty making their loan repayments at present, please have them contact us on 1300 366 296.
Any changes in interest rates from last week are highlighted in orange.
Note – Increases announced by lenders as a result of RBA decisions normally take 1-2 weeks to come into affect.
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.