If further forecasts of multiple interest rate hikes in 2022 materialize, Australian borrowers will soon see their maximum borrowing capacity reduced by tens of thousands of dollars.
If this prediction – which is largely matched by other banks and the market – comes true, someone earning $100,000 a year would see their maximum borrowing capacity drop from $31,900 to around $719,100.
A person with $150,000 a year would see theirs drop by $46,200 while a person with $200,000 a year would see theirs drop by $61,400.
The new estimates, calculated by RateCity.com.au, are based on a single person taking out a 30-year loan at the average variable rate of new customers with no other debt.
This is an estimate because the borrowing capacity depends on the personal situation of the persons and varies from one lender to another.
RateCity.com.au research director Sally Tindall said multiple interest rate hikes are likely to cool Australia’s hot property market.
“A series of cash rate hikes, whenever they occur, are likely to put a damper on our property market,” Ms Tindall said.
“Anyone borrowing at full capacity will see their budget dwindle, which could be enough to cool things down, especially in real estate hotspots such as Sydney and Melbourne.
“While the majority of rates are no longer at historic lows, there are still 31 fixed rates and 72 variable rates below 2%.
“Refinancing at a lower rate now could soften the blow when the RBA starts to rise.”
Ms Tindall said the Reserve Bank’s hand could be forced following surprise inflation data that showed the cost of living was skyrocketing.
“With inflation on the rise both at home and abroad, pressure is mounting on the RBA to hike the exchange rate,” she said.
“The RBA wants to see stronger wage growth before asking mortgage holders to pay more. However, higher than expected inflation figures, falling unemployment and a push by other central banks to raise rates might force his hand sooner than expected.
“Even if the RBA holds out until 2023, there’s a good chance that lenders will still increase variable rates, especially if funding costs continue to rise.”
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