The Fixed Rate Mortgage Cliff - Not The Armageddon The Media Has Promised?
In This Weeks How's The Market | Edition 36
The Fixed Rate Mortgage Cliff - Not The Armageddon The Media Has Promised
Sentiment Is Rising - Though Is This Short Lived?
The Top 20 Property Investors In Australia By Occupation
The Fixed Rate Mortgage Cliff - Not The Armageddon The Media Has Promised?
If you’ve heard any property news recently you know that in the latter half of 2023 and early 2024, there will be approximately $350 billion dollars of mortgages that are fixed at around 2% switching back over to variable rate loans at around 5%. This will increase mortgage repayments for this cohort drastically, however, it will not cause arrears to rise by a large percentage or cause house prices to plummet like the word ‘cliff’ may have you believe.
The RBA stated in their February meeting minutes that Australians have some of the highest household savings in the developed world in relation to income, however, they admitted these additional savings might not be distributed evenly across households and it was unclear how and if these additional savings would be used.
According to CoreLogic, homeowner equity is also at an all-time high, as can be imagined following the once-in-a-generation property boom that occurred throughout Covid. Their numbers predict that approximately 1% of mortgage holders will be in a position of negative equity where their house will achieve a lesser value than what they purchased it for if they were to sell.
It’s also worth noting that those on fixed rates have had nearly a year to prepare themselves for the increases and have been able to save additional money on the lower rates. Additionally, the majority of people with mortgages have been paying the higher rates on variable the entire time whilst arrears and default rates have stayed very low, showing that whilst it will be a shock increase, it is not something the Australian population is incapable of weathering.
What The Agents Are Saying
This past weekend we attended various auctions throughout Melbourne and saw strong results with agents stating that competition has been fierce. SQM reported that auction clearance rates rose from 54.1% in the previous week to 56% this weekend, whilst CoreLogic reported clearance rates rose from 65.6% to 66.8%.
Agents have stated that sentiment is rising and they are starting to see some buyers that have been sitting on the fence jump back into the market.
Many of the properties I saw purchased over the weekend had multiple bidders with some having 7 bidders on a particular property.
The Wow Factor!
What a backyard! This property looks like it has a brilliant use of its 2.1 hectares of land amongst the trees in the Dandenongs.
In The Media
Top 20 property investors in Australia ranked by occupation revealed
An interesting article showing who is the most likely to invest in property. There are a few surprising appearances on this list. High-paying medical professionals don’t surprise me one bit, though school principals are in the top 10 with over 34% of the occupation receiving rental income last year!
Final Thoughts
CoreLogic questioned this week if we are seeing the beginning of the recovery or if we are in the eye of the storm. Next week shall be interesting to see if we still receive another interest rate rise and how the market takes that information.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is my opinion, please seek your own expert advice when making decisions.
