Option for casual employment
A major lender has amended their employment policy to help casually employed clients. For clients in full time, part time, or casual roles, there is now no minimum employment tenure required, provided that at least 6 months employment in the same field/industry is evident. Typically, banks will want to see a client with casual employment in their role for at least 6 months before accepting this income source.
Mortgage stress when fixed rates expire
20% of existing fixed rate mortgages are due to expire by March next year, according to RBA data.
While a lot will depend on the trajectory of the cash rate, JPMorgan estimates that were the cash rate to rise by 350 basis points overall, from May this year, some 60% of households will see their mortgage repayments jump by over 40%. Fixed rate mortgage holders will see a sudden jump up to variable rates as those periods expire.
This will inevitably push some households into mortgage stress, JPMorgan notes, particularly low-income earners, but the pressure overall will be partially offset by household savings, the liquidity buffer provided by low fixed rates over the period, and reduced household spending.
Demand falling
Australian Financial Group (AFG) has released its mortgage index for the September quarter, which shows home loan lodgements with AFG brokers down – 11% year on year. JPMorgan assumes this reflects a combination of very strong growth in FY21, higher mortgage rates, falling house prices, falling borrowing capacity and weak home buyer sentiment.
Higher interest rates are also now leading to a drop-off in loan sizes.
