Australian home owners banished to mortgage hell

Yesterday’s 0.5% hike in the official cash rate (OCR) by the Reserve Bank of Australia (RBA) sent another arrow through the hearts of Australian mortgage holders.

Following three consecutive monthly rate hikes, the OCR has lifted to 1.35%, up from April’s record low of 0.1%.

In a matter of days, every variable mortgage holder in the nation will feel the impact, with the average discount mortgage rate set to rise to 4.7%, up from April’s low of 3.45%:

Average Australian mortgage rates

Australian mortgage rates soaring.

As shown above, fixed mortgage rates have already lifted sharply, with the average 3-year fixed rate climbing to 5.7% in June – way above the pandemic low of 2.1%.

The dollar impact of the RBA’s three consecutive rate hikes are illustrated in the next table:

Average Australian mortgage repayments

Mortgage repayments have already risen by 16%.

Average monthly mortgage repayments have risen by 16% from their April pre-tightening level.

For a household with a $500,000 mortgage, this represents a monthly increase in repayments of $362. A household with a $750,000 mortgage will pay an extra $543 a month, whereas those with a $1,000,000 mortgage will pay an extra $724 per month.

More mortgage pain to come:

The AFR’s latest survey of 31 economists revealed a median forecast for the OCR of 2.35% by December and a peak of 2.85% by mid next year. If true, Australia’s OCR would rise another 1.5% from its current level.

The futures market remains even more bullish, tipping an OCR of 3.0% by December and 3.5% by June 2023.

Either forecast would see Australian mortgage rates soar.

Australia’s average discount variable mortgage rate would climb to 6.2% under the economists’ forecast (dashed red line below) and to 6.9% under the market’s forecast (solid red line below):

Projected mortgage rates

Fastest rise in mortgage rates in Australia’s history.

As shown in the next table, average monthly mortgage repayments would soar by 37% (economists’ forecast) or 48% (futures market’s forecast) versus their level in April before the RBA commenced its rate tightening cycle:

Forecast mortgage repayments

Mortgage hell incoming!

In dollar terms, a household with a $500,000 mortgage would see their monthly repayments rise by $831 (economists’ forecast) or $1,662 (futures market’s forecast). A household with a $750,000 mortgage would see a $1,247 or $1,593 increase. Whereas those with a $1 million mortgage would see monthly repayments soar by $1,662 or $2,123.

Under either scenario, Australian home owners would descend into mortgage hell.

Unconventional Economist
Latest posts by Unconventional Economist (see all)


  1. Ah yes ,the 12:05 nightly report straight from the Twilight Zone.

    “Under either scenario, Australian home owners would descend into mortgage hell.”

    Newsflash- this is not hell for the long suffering savers in this country, nor for the patient and prudent who said ” You know what? I don’t think these prices are in touch with reality and why should I be the greater fool?” (Yeah, remember that blog too?).

    In the words of Tracy Chapman …”and finally the tables… are starting to turn”.

    • Leroy Huggins

      “long suffering savers”? Why didn’t you simply invest your money elsewhere for a return? Any suffering was self-chosen, to a far greater extent than a person buying a home to live in. You understand that financial reward is based on risk no? A savings account (appropriately managed in Australia), carries zero risk, and hence is not supposed to receive any kind of life supporting return.

      • pfh007.comMEMBER


        What you call a “savings” account is an unsecured investment in a private bank.

        The idea that any private organisation should have the taxpayer provide their unsecured investors with a “guarantee” is absurd and is why until the GFC unsecured investments in banks did not receive a guarantee.

        No one knows what the so called guarantee means and whether it will be honoured or honoured in full.

        So there is clearly risk and that requires reward.

        If savers were permitted to operate 100% risk free and liquid zero interest reserve accounts at the RBA and the taxpayer guarantee on unsecured investments at the banks were removed we would quickly see what the banks need to offer to attract unsecured investments.

        As for providing people who enter contracts of mortgage with variable rates why do you think that those contracts should not mean exactly what they say?

        Circumstances change and rates rise.

        That is how those mortgages work.

        Running a taxpayer subsidised program for asset price punters is what has created this mess and bailing out their dud decisions will just make it worse.

        Those who have made bad decisions should sell their assets and pay back their debts before they lose any more equity.

      • You remember that word risk when mortgage holders are standing in Martin Place with their hand out.
        The issue here isn’t that we didn’t take a risk and are demanding a return. The issue here is, why is it even news that people who took a risk are squealing for those risks to materialise now?
        Suck it up like we have had to.

      • The money hasn’t just been sitting there carrying 0 risk, it has been used to generate a return for the bank and hence has some risk associated with its use, as it always has

      • Lerroy, what a load of rubbish, prudent savers were forced to invest in riskier assets in order to get a return somewhere in line with inflation, thereby inflating asset prices including housing. And FYI, savings accounts ARE NOT risk free, inflation is eating away your spending power and if the bank fails you stand to lose a portion of your money, the 250k government guarantee is smoke and mirrors, each lending institution is limited to 10 billion each.
        Anyone who took a mortagage out 2 or more years ago are still enjoying lower interest rates than they were when they took out the mortgage.Mortgage hell my arse.

      • To be honest Leroy the mispricing of capital (aka savings) over the last 12 years doesn’t worry me in the slightest.
        What does however concern me enormously is the mispricing of labour relative to assets.
        It is “Equity mate” along side mispriced labour and absurd exchange rates that have driven Australia’s Manufacturing industries to the wall. Now don’t get me wrong there’s nothing righteous about manufacturing however wrt to global manufacturing it’s impossible to get ahead of yourself, you either deliver value (whatever form that takes) or you get replaced and confined to the dust bin of history. When you succeed you do so because of the value created by the manufacturing team. This value can result from supplying the cheapest make labour on the planet (as was the case wrt China pre 2000) or you can focus your expertise on market segments which value something other than end price, for example ship building (
        My point is that in all of these activities your labour is always correctly priced, but you always have the opportunity to increase its value through things like specialization, education, automation, market segment selection ….
        It’s this “invisible hand” which moves (and motivates) say a simple welder to learn how to automate welding tasks. This value creation belongs to labour in the sense that the welder who understands how to operate (and maximize the throughput of the Automated welding machine) can easily demand double the pay.
        Australia’s deindustrialization has stripped labour of a well understood path to wealth and thereby devalued our labour force. Today we are seeing the consequence of 20 plus years of deskilling manifested as an Asset / Labour mispricing. Unfortunately the skills that were valued 20 years ago are practically worthless today and we’ve missed out on 20 years of global manufacturing’s invisible hand guiding our labour on the right path for value maximization.

        Australia’s 2022 labour mispricing / mis-skilling is a tragedy of epic proportions, there are no quick fixes for this and the next generation will suffer from the sustained 20 plus years of under-investment. That’s the real cost of our trip into asset lala land, your lost savings/interest are of no consequence when compared with this disaster.

      • When interest rates where 18% were people not getting 12% returns on their savings? Or is that not a return?

      • You and PFH007 need to get a room and consider whether inflation is a risk worthy of a rate greater than 0%. Or perhaps you have no problem at all seeing a worker spending years to save a 20%, only to see it turn into a 10% deposit due to house prices doubling.

  2. MattymacMEMBER

    I would like my adult children to be able to buy a house at some point without the bank of mum and dad. If the cost is the specufestors descending into hell I’m ok with that as they have been making private profits through not paying taxes that could be used for something useful.
    Unfortunately the rest of us will be collateral damage,at least in the short term. The reality is we need a major reset at some point. As a start we could get back to pre pandemic house prices…. Yes it’s going to hurt but you can’t suspend reality forever

    • You cannot have a decent society when decent shelter is scarce and expensive and difficult to obtain.
      A decent society requires decent shelter to be in abundance and easy to obtain (cheap to rent or buy).
      Vote accordingly.

  3. boomengineeringMEMBER

    The Fed broke it. Now they own it.
    The answer to your question yesterday of why house prices in Sydney are higher than Perth.
    It’s simple mathmatics. If wages are double in Sydney but most costs are the same then disposable income can be many multiples more in Syd which can feed higher house prices.
    Example. If someone in Perth gets $800 per week and their costs are $750 , then they have $50 disposable income. Someone in Sydney gets $1,600 per week and their costs are only slightly more at $800 per week then their disposable income is 16 times higher. That is $800 extra per week that could help feed a mortgage.

    This is compounded by many in Sydney getting far higher renunciation than example and further compounded by tradies in Perth being downtrodden ( mining excepted) as opposed to Sydney’s tradies being very well paid. A bit similar to German tradies being put on a pedistal as opposed to the British tradies.
    Question, is there still a big British influence in WA ?

    • boomengineeringMEMBER

      Proof read after the fact, ph auto spell at it again, remuneration .

    • pfh007.comMEMBER


      The difference is that for an extended period residential vacancies in WA exceeded 5%.

      All those vacant houses cooled the fairy stories of spruikers and that is why WA rents and prices fell even though the price of credit was exactly the same as in NSW.

      Differences in earnings do not explain the difference experience.

      • boomengineeringMEMBER

        Of course other factors are size of population, available land.and access to building materials. Mumbai has some of the world’s most expensive RE.

        • Also, Perth sucks. Born and raised there, left as soon as I could. Haven’t been back once for a visit.

    • What you miss is the drop that occurred in WA’s GST share. That hurt and hurt big time. Collapsed the economy and took away all confidence.
      That now has been ‘fixed’ and faith is coming back.
      Dish Perth all you want but WA truly is the place to be.

    • DingwallMEMBER

      According to ABS 2021 Of the state capital cities, Sydney had the highest median weekly earnings ($1,300 per week), followed by Perth ($1,211), Melbourne ($1,200) and Brisbane ($1,199).
      So potentially wages are not a driver of such differences. Punch vast immigration in, restrict land supply and rezoning and have poor town planning though….

      • boomengineeringMEMBER

        Thanks for the new info. Will have to modify my years ago based assertions.

    • higher wages will put upward pressure on house prices, however the overwhelming reason why sydney median house prices are double perth median house price, is because that is where the immigrant deluge settlles.

  4. This hasn’t even started
    I’m said a year ago where fixed rates are going CBA 5 year fixed 6.84 now
    They may have peaked here for the time being but interest rates will head to 1989 levels over the next 4 or 5 years & higher
    We are going to have a repeat of worse than 1980s you’ll see home loan rates with a 20 handle
    Don’t live in denial
    Because when the downturn comes they’ll print more money rinse & repeat
    I said a year ago when rates were 1.99 the central banks are trapped
    They are a 1 trick pony

    • When the downturn with rinse and repeat comes, that would mean rate cuts and TFFv2 right?

      • Rippy
        The banks aren’t going to survive in their current form
        Some sort of bail out mergers Nationalisation etc not sure
        Yes TFF it’s all just fancy words for printing money & creating more inflation
        There is a house price crash coming in 2023 worse than Ireland
        There will be some bounce from the ashes
        50 to 60% there abouts down some prices will fall more in some places
        Maybe 10/20% bounce up 2024
        But they are going to just keep printing money & interest rates will end up at 1980s level
        You’ll never see last years prices again for 10 or 20 years min

        There is going to be blood before TFF

        • boomengineeringMEMBER

          Problem is that there is nowhere to hide.
          Someone who owns their house would be foolish to sell as their declining equity/wealth is more secure left there. Even physical gold more than $5k is recorded and able to be confiscsted .

          • Totally agree Boom – that’s why I think the falls won’t be as bad – yes we’ll get falls and maybe no growth after that for a long time but not armageddon.

          • Buy in a tropical island and enjoy yourself fishing/making stuff/helping the locals. No stress and then when the dust settles move back if you want.

    • PalimpsestMEMBER

      Dear @bc – it’s good to see your contributions again. I might question aspects of your views, but you make an important contribution.

    • 1 only maybe. After that the global economy will be in a deflationary death spiral, central banks will be printing before you know it and most here will be in utter shock since they believed the central banks lies once again.

  5. Quantitative FleecingMEMBER

    The choice is simple: you can be banished to mortgage hell, or you can be banished to Perth.

    If you need to know which way to go, just ask Bill

    • Quantitative FleecingMEMBER

      This is hilarious. In my opinion it comes from two sources:

      (1) People whose mortgages haven’t ticked over to a higher rate because they were on a 2% fixed for two or so years.

      (2) People with so much paper wealth in their house (equity) which they believe only ever goes up and are still spending accordingly.

      The funny part is that this means that spending won’t come down until house prices do really crash somewhat.

      It’s almost as if in an economy where assets have been inflated to ridiculous levels and the “wealth effect” has become an inbuilt feature, that they have to push it to the point where people realise that they won’t be bailed out by the central banks to actually stop them spending and taking on more debt, rather than taking their spending power through higher rates alone. So in my opinion inflation won’t be stopped until assets crash, and are not bailed out by the central bank. Otherwise the buy the dip mindset will just keep pushing prices higher.

    • I wonder if the boomers with no debt will simply see this as a great spending time for them. More caravans, second houses and new land cruisers.

        • I see tv ads for caravan industry jobs. Great initiative, but gees, don’t we have other industries that need labour resources ahead of them
          Now the country is being powered by home builders and caravan builders , the new tiny houses!

      • Arthur Schopenhauer

        The oldest Boomers are starting to get “Old”. Outlooks change after 75?

    • To soon ……. we’re to used to seeing things happen like a mini series
      These things take a while to pan out remember, maybe 2 yrs
      People still have equity to burn, theres credit cards, BNPL , and a population very used to spending on discretionary junk, along with ‘it won’t happen to me’, cos my house went up x% last yr.
      UE at 3.9% needs to start rolling over too.
      Someone mentioned the ‘everyone gets a participation trophy syndrome, that needs to be smacked outta people too
      Recessions are a slow burn, patience grasshopper

    • In NSW, people were trying to use up their Dine-and-Discover vouchers before they expired at the end of June. Another case of government stimulating at the same time RBA is hiking. The Hotel/Motel vouchers are still good until October.

    • Yeah I think early stages of this, may actually see an uptick in spending as people tend to buy before prices go up and switch from services to goods.
      Womens beauty as an example, people now buying the equipment to pluck and tweeze at home instead of paying the money in a shop for the service. Whilst the behaviour of the customer is changing, might see contra indicative spikes.

      • The Travelling PhantomMEMBER

        My girlfriend wanted to book hair saloon thingy and they told her 6 weeks waiting time!!
        I think for hair trim, wash etc 6 weeks is huge time , isn’t??

        • Daughter in law on sunny coast specialises in blond hair and extensions only and is always booked out 6 weeks in advance.
          Wfh, minimal overheads and charges like a wounded bull. Almost recession proof. These 20 and 30 something vain little coast girls will sell their granny and make their next booking as they walk out the door, to make sure their blond bits are in tip top shape.

        • I think there are some tight labour market conditions factoring into that there that won’t bring services spend down. But the goods spend, I reckon is pointing to a change in behaviour.

    • If the lift business gets tough it might be time for you to get an education, you’re ready. you’ve got a good and curious brain, develop it. Don’t listen to the bullsh!tters on here.

      • The Travelling PhantomMEMBER

        It’s nearly recession proof, unless all of a sudden all these buildings with lifts get empty and no one needed to service, maintain and check regularly.
        How ever I am studying part time!!🙂

    • Knowing inflation is not going to stop, many people shop and stock up non perishable items. Once they stock enough and unemployment start increasing again, good luck to the restaurants and retail. Can’t wait for the 90% off on my clothing shopping next year

  6. You know who has been really quiet? APRA.
    Interesting time to not be saying a single word.

    • Why would they? Wayne Byers would be delighted that Phil Lowe is copping all the heat for his ‘double cross’ on good, honest, high-leveraging Aussies. He should continue to hide at home away from the spotlight as long as possible, ideally until the crash is over and the full blame for it has landed on the RBA.

  7. Mike Herman TroutMEMBER

    “Australian home owners would descend into mortgage hell”

    At least they won’t have to pay for heating…

    • boomengineeringMEMBER

      Soft c0cks paying for heating in the first place. What’s wrong with more blankets and jumpers (clothes).

      • I’m doing my bit to speed up “global warming “.
        Tassie will be lovely with Sydney’s climate.

  8. … Who broke my heart, you did, you did
    Bow to the target, as Phil alluded
    You think you’re smart, stupid, stupid

    … Shoot that poison arrow to my heart
    Shoot that poison arrow
    Shoot that poison arrow to my heart
    Shoot that poison arrow

  9. Finance MessiahMEMBER

    If the goal of the RBA is to crash Australia’s economy, it’s plausible we’ll see a few more increases before years end. It would be wise for the RBA to take a step back now, but it won’t. Captain Philip of the RBA Titanic seems hell-bent on punishing consumers for buying food and filling their cars with fuel.

    Despite the fact that in the July statement Philip “middle-class hating” Lowe acknowledged that most of the problems causing inflation in Australia are global, he couldn’t help but throw that jab in there about household spending. The days of pandemic flat screens and renovations are gone now. A large portion of the household budget is now directed towards rent/mortgage, electricity, fuel and food.

    The rising price of fuel alone will do more to reduce discretionary spending come September when the excise is gone and fuel edges towards $3 a litre.

  10. Ok Macrobiz, i luv you guys but your now screaming that rates are going to kill households, yet you were saying that basically property buyers were greedy and morons for paying to much and suffered from FOMO…so now your on their side by slamming the RBA from what is essentially their task…and the main one is to control inflation…these property investors/owners etc clamored over themselves to get in and now will pay the price. RBA made a mistake by keeping rates to low for too long and the punters capitalized on their mistake….now they are correcting it these people will feel the pain…simple as that.

    • Finance MessiahMEMBER

      Not just mortgage holders will feel the pain. If you rent or have a mortgage, you’re screwed with cash rate increases. Landlords will pass on any additional increases to tenants. Nobody is saying that rates shouldn’t go back up. We knew they were too low. Many of us and those at MB are arguing that the RBA is moving too aggressively. Rates should have slowly and steadily increased in 2021 until now. We are seeing the RBA panic and scramble, making huge moves in a short period which is irresponsible because they dragged the chain, they were too slow.

      Why should consumers be punished for RBA’s turtle-pace reaction to what was an obvious problem even back in 2020?

      • pfh007.comMEMBER

        “..Landlords will pass on any additional increases to tenants…”

        If landlords could charge more they already would be charging more.

        What is causing rents to rise are not rises in interest rates but a shortage of housing because despite all the shortage deniers claims we simply do not have enough housing. Vacancy rates of approx 1% are consistent with a massive shortage of housing that is available to rent.

        That will increase rents and not fantasies that landlords can just increase rents whenever they feel like it.

        • “If landlords could charge more they already would be charging more”
          Over the longer term you’re right however over the shorter term many landlords will try to increase rents to match their increased costs gambling that the tight rental market will give tenants few other choices. Even if the tenants leave it’ll still get the landlord a few months higher rent and maybe that’s all they’ll need to see out this interest rate blip.
          This dynamic is the reason that I bang on about Tenant rights so much. If Australia had specific laws preventing Landlords from “no reason” evictions than Tenants would at least have a legal leg to stand on but that’s not the case in Australia where landlords can be the biggest bullies on the block and get rewarded for their bravado. It’s the new improved Aussie form of “fair” it’s egalitarian in every sense….not!

        • boomengineeringMEMBER

          007, Correct,
          and also, if tenants lose their job how will they pay existing rent let alone an increase.

        • Finance MessiahMEMBER

          The thing is, landlords are already charging more. The rental I was in early this year before buying a house was $460 a week. The new tenants are paying $660 a week. The price increase predates any interest rate rises. It was because demand is outstripping supply, and they can.

          You are not going to see this happen instantly. In 6-12 months’ time, you’re going to start seeing rents sharply increase yet again. At least landlords will have a valid excuse for jacking up the prices. Rents were already rising before interest rate rises, but now we have this perfect storm where rents went up and if landlords want to keep whatever profit margin they currently have, they’ll have to hike them up again to keep it.

        • Display NameMEMBER

          It is a shortage of houses to rent, not a shortage of house per se.

          The census suggested that on Census night ~10% of dwelling not occupied. Perhaps some incentives for occupation might help. We can build, build, build but unoccupied buildings are not going to help.

          • drsmithyMEMBER

            I had a quick trawl back through previous Census and that 10% unoccupied figure didn’t seem unusual ?

      • A lot of landlords with existing agreement may need to take a hit before they have the opportunities to pass on the interest rates hike in 3-6 months time. Rental crisis will just getting worse toward later this year.

      • >> Why should consumers be punished for RBA’s turtle-pace reaction to what was an obvious problem even back in 2020?

        Because if they don’t,consumers will keep being punished at the gas pump due to AUD tanking. This is what noone talks about – the “what if rba does NOT raise rates and letthe currency drop to import even more global inflation??”

        • Finance MessiahMEMBER

          Until the issues affecting the price of oil and gas are resolved, isn’t it just a game of cat and mouse? The fuel cost goes higher, and the RBA raises the cash rate. It’s all well and good for simplistic monetary policy thinking to say, “Well, people need to stop paying these prices and they’ll come down.” I know the RBA has to increase because other central banks are doing the same thing.

          The crazy thing is, we would see inflation come down if we sorted out the East Coast Gas Market. Right now, we are beholden to global LNG prices because of it and it’s having a profound impact here despite the fact we have an abundant supply of gas here.

        • “what if rba does NOT raise rates and letthe currency drop to import even more global inflation??”
          Can you say entitled in any other way, seriously…
          If the AUD falls then we’re F’ed ….ah no Australia still has global facing industries which will benefit enormously from an AUD devaluation.
          Our farmers will benefit, our miners will benefit, our manufactures will benefit, our resource development industry will benefit, our high tech industry will benefit ….you get the picture many Australian’s that have suffered from an over valued AUD will finally see the pendulum swing in their favour.
          Maybe in a year or so they’ll find that they’re the only bidder at the Sydney house auction and they can finally buy a house, maybe they’ll be rewarded but no F-the-lot-of-them we need the RBA’s resources focused on maintaining the purchase power of our beloved Pacific peso so that savers and Property Investors can enjoy their spoils.

          • Nope.
            Let’s break down your industry list.
            Our farmers will benefit, farmers need to pay for fuel too, this is global cost push inflation. They are paying for those prices in aud.

            our miners will benefit, our manufactures will benefit, – i think you will see on this website that these will be torched by the high energy prices, that, due to lack of reserve for local industries,are being made to pay global prices.
            our resource development industry will benefit, our high tech industry will benefit – sorry what are these and since when do we have a high tech industry? The biggest tech companies are atlassian, computershare. Who is this high tech industry? I ask because I am in the tech industry, aus is so devoid of this that most of us work in either finance or my uni mates went overseas.

            You can’t unlock those benefits of lower $$ without domestic gas reservation that won’t just flood these industries with the cost of energy during an energy shock. Spouting off a list of industries with no correlation to the situation we are actually in due to lack of any decent policy making, doesn’t make it magically happen.

          • Australia has some high tech industry “green-shoots” we can either nurture them or we can destroy them. it all depends on the course that the AUD takes.
            In Sydney for instance you have underwater robotics companies like BlueprintLab or in a somewhat related field you have Abyss Solutions providing various underwater asset inspection services (along with the specialty machines and expert labour needed)
            There’s also the whole team at Airsight (or whatever they’re called these days) doing drone asset mapping.
            The guys at Boeing Australia are doing some impressive work which no one can talk about.
            It’s not much but it’s a start, it’s a green-shoot that we can nurture or an opportunity that we can crush and send all these players off-shore.
            Make no mistake about it, the pricing of our Aussie poo does play a role in these decisions and does impact these outcomes.

          • As for gas reservation, I agree completely, something needs to be done and I’m hoping that Albo has the backbone needed to face these Natural gas cartel thieves and call them out for their misconduct. I’m not at all wishy-washy on that point.
            As for farmers needing to buy overpriced diesel and fertilizer to enable their farms to function. This is a global constant every farmer (and farm economy) in the world is facing the same cost pressures (look at SriLanka where fertilizer imports have been banned and diesel imports curtailed because the economy can’t afford these resources). Over the long term our farmers will benefit from their expertese and the value they add by efficiently growing things, if our AUD is priced to allow them to benefit.

          • BTW I intentionally picked high tech industries in related fields because this is where real world growth happens, it is where Opportunities are the greatest.
            In Economic Complexity Analysis there’s a parameter called “distance” which is one of the most important parameters affecting the ability of any group to succeed on the world stage
            If you have your heart set on succeeding in High Tech I’d suggest you start by understanding what sort of environment creates successful startups.

      • Rents can only go so high before people start moving back in to parents house, start getting crafty with sharehouses etc. If/when rents rise that will feed into people asking for pay rises which causes businesses to charge more and on and on.
        If people start getting too stretched they will stop spending and the system will start to collapse. The low hanging fruit first, coffee shops will get smashed followed by other non essential items like take away. Then retail smashed and around we go, so let hope people get greedy and start to raise rents to expedite the recession/ depression.