Borrowers may have dodged the mortgage cliff. But renters are falling off it
Economists were forecasting a “mortgage cliff” as borrowers on fixed loans adjusted to sharply higher rates. But it now looks like renters are the ones falling off it.
We've reached a critical economic moment. We’re about halfway through the move of more than one million mortgage holders with low fixed rate loans onto higher variable rates.
No surprises, then, that the Reserve Bank’s new 76-page Financial Stability Review released on Friday includes a special update on these fixed-rate borrowers. But what it tells us is that we should refocus our collective gaze away from the alleged "mortgage cliff" and perhaps towards a renter cliff instead.
Anyone with a mortgage will be quick to remind you they've seen their repayments skyrocket. That's true. Repayments have increased by somewhere from 30% to 50% since April 2022 on RBA figures. But what the central bank is finding is that home owners are rising to the challenge and finding the cash to repay. That’s not to say there aren’t some households doing it tough (the review found a small but growing share of struggling borrowers).
So far, about 45% of loans fixed when rates were at their lowest levels have moved onto higher rates and it hasn't been the disaster some were expecting. There is little reason to think the rest of the loans yet to move onto variable rates will be much different and regulators appear relatively relaxed.
