Why Australia is the worst place to have a mortgage despite our interest rates rising more slowly than other countries
- Reserve Bank of Australia shows mortgage crisis
- Tariffs are stricter than in other developed economies
Australia is the worst place in the world to have a mortgage, despite interest rates rising more slowly than developed countries, it has been found.
A chart released by the Governor of the Reserve Bank of Australia (RBA), Dr. Philip Lowe, shows that Australian mortgage rates are rising faster than those of Canada, Norway, New Zealand or the UK.
It comes as the International Monetary Fund, an organization that focuses on global economic growth led by the United Nations, are published World economic outlook on Thursday.
It found that Australians have the second highest chance of defaulting on mortgage payments after 10 consecutive rate hikes.
A chart released by the Governor of the Reserve Bank of Australia (RBA), Dr Philip Lowe, shows that Australian mortgage rates are rising faster than Canada, Norway, New Zealand or the UK
This is despite the RBA raising official interest rates by less than central banks in other major economies.
While rates in Australia increased by 3.5 percent, the official rate in New Zealand increased by 5 percent during the same time.
Dr. Lowe explained that the increase in mortgages in Australia is due to the “predominance of floating rate mortgages”, while fixed rate mortgages are more common in other countries.
Australian households also carry the second largest mortgage burden in the world, behind only Switzerland.
Australia was beaten only by Canada for the highest default risk and was followed by Luxembourg, Norway, Sweden and the Netherlands, according to IMF data.
Dr. Lowe explained that Australia’s mortgage boom is due to the “predominance of floating rate mortgages”, while fixed rate mortgages are more common in other countries
The bad news comes as nearly 900,000 Australians prepare for their record-low fixed mortgage rates to expire this year.
The dreaded phenomenon has been dubbed by economists the looming “mortgage rock.”
With the official spot rate at 3.6 percent, repayments on some fixed-rate loans could triple overnight thanks to the Reserve Bank of Australia’s (RBA) relentless interest rate hikes announced in May 10 last year. months have passed.
Treasurer Jim Chalmers (above) confessed that the IMF’s economic outlook was “pretty bleak.”
Rising tension from struggling Australians led RBA officials to admit that they had managed the economy during Covid ‘horrible work’.
Speaking at a panel in Melbourne on Wednesday, seven-year RBA board member Ian Harper said the financial impact of Covid left the bank struggling to maintain real stability in the economy while maintaining its inflation targets. The Australian reports.
“Both of these factors led us to be extremely cautious — overly cautious in hindsight about how we set interest rates at the time,” he said.
He admitted to the panel ‘in hindsight … it looks like we did a terrible job’.
“When you look back, you often see things much more clearly than you did at the time,” he said.