Younger Aussie home owners are about to cop it in the neck today when the Reserve Bank of Australia (RBA) hikes the official cash rate.
Most commentators expect the RBA to hike by 25 basis points, which would lift the OCR to 3.35% – it’s highest level in more than a decade:
Homeowners with a variable mortgage will pay an extra 45% in monthly repayments following the RBA’s hike:
To add further insult to injury, the percentage of first home buyer (FHB) mortgages taken out at cheap fixed rates over the pandemic hit a record high 60% share. Soon, thousands of these fixed rate mortgage will reset to rates that are double or triple their current levels, placing extreme pain on recent FHBs.
Meanwhile, younger Australians stuck in the rental market are suffering through the tightest vacancy rates on record, alongside rents that are soaring at double-digit rates:
Thus, it is clear that younger Australians are wearing the brunt of soaring housing costs – both mortgage costs and rents.
On the other end of the spectrum, the older generation is creaming it relatively speaking.
Australian households aged over 65, who hold very little mortgage debt, accumulated the overwhelming majority of savings over the pandemic, followed by 55-64 aged households:
They are, therefore, arguably benefiting from the rise in interest rates.
Even poorer older Australians on the aged pension have seen their payments increase in line with CPI – something workers could only dream of. And because they hold little mortgage debt, their cost of living has increased more moderately than working aged Aussies:
Whether through the RBA’s aggressive rate hikes, or the Albanese Government’s mass immigration policy (which is inflating rents), younger Australians are bearing the burden of adjustment.
