Warning to mortgage holders as NAB predicts loan repayments will jump 32 per cent – with the average household pay an extra $721 a MONTH
- National Australia Bank tipping a big surge in variable mortgage rates by 2023
- Forecast variable mortgage rates rising by 2.25 percentage points in 18 months
Typical Australian borrowers could see their monthly mortgage repayments climb by a third or $721 during the next 18 months, a major bank predicts.
In January, Australia’s median property price stood at $718,146, following a 22.4 per cent annual increase which was the fastest pace in 32 years, CoreLogic data showed.
With a 20 per cent deposit factored in, a borrower paying off a typical Australian home would owe the bank $574,517.
Someone with this kind of mortgage, with a still-low 2.39 per cent variable rate, would now owe their bank $2,238 in repayments every month.
Typical Australian borrowers could see their monthly mortgage repayments climb by a third or $721 during the next 18 months, a major bank predicts (pictured is an auction at Strathfield in Sydney’s inner west)
But National Australia Bank is predicting a 2.25 percentage point increase in mortgage rates by September 2023.
Should variable rates rise to 4.64 per cent, monthly repayments on a mid-point priced Australian home would climb by $721 to $2,959, marking 32 per cent increase in just 18 months.
NAB’s director of economics Tapas Strickland said interest payments as a share of household income would rise to the highest level since September 2012.
The Reserve Bank of Australia cut the cash rate to a record-low of 0.1 per cent in November 2020 and Governor Philip Lowe last year repeatedly promised to leave it there until 2024 at the earliest.
Even with rates at low levels, an average, full-time earner on a $90,329 with a $574,517 loan would have a debt-to-income ratio of 6.4.
The Australian Prudential Regulation Authority considers six to be a dangerous level where a borrower would struggle to pay their mortgage and bills.