A significant number of homeowners who bought properties during the pandemic are preparing for additional hardships.
Many Australians who are already facing difficulties with the high cost of living will experience further hardship as their fixed-rate mortgages reach maturity in 2023. This is because 20% of mortgage holders who took out loans during the pandemic, when interest rates were at ultra-low levels, will have their fixed rates reset by the end of the year. These loans were obtained at rates ranging from 1.75% to 2.25%. However, the Reserve Bank has raised the cash rate to control inflation, which reached 7.8% in December.
ANZ senior economist Catherine Birch stated that the recent rate hike has almost guaranteed further hikes of 25 basis points in February and March. This will cause even more hardship for homeowners as those with fixed-rate mortgages will see their rates rise to around 5-6%, more than double the current rate. Minister of Finance, Katy Gallagher, acknowledges the impact this will have on homeowners and businesses and considers controlling inflation a significant challenge in 2023. However, despite her concerns, Gallagher believes Australia is not immune to global economic challenges and that further rate hikes could lead to a recession.
Senator Gallagher stated that the government recognizes the challenges ahead but highlighted positive factors such as low unemployment and favourable export prices. She emphasized the importance of staying focused, especially as the budget is being prepared, and making decisions that will work with the Reserve Bank to support the economy. The Senator also indicated that the budget would concentrate on health and reducing the cost of living burdens.
