No forced property sales, but mortgage stress will hit breaking point

The AFR this week reported on a new PEXA report, which argues that large-scale distressed sales are unlikely given Australia’s low unemployment, rising property demand, and a lack of supply.

This view comes despite over 600,000 fixed rate mortgages set to expire over the nine months to December 2023, which will see borrowers’ mortgage rates jump from around 2% to over 5%:

“I don’t think this will lead to massive fire sales because we’ve still got very low unemployment in Australia”, PEXA head of research Mike Gill said.

“For fire sales to occur, you have to see high unemployment where borrowers lose their jobs and they’re forced to make these selling decisions. We’re not seeing that”.

“Some borrowers will really struggle to make their repayments and may be forced to sell. But I think on balance, we probably won’t see that to a great degree”.

Whether a significant number of distressed sales will hit the market remains to be seen.

But one thing is for certain, mortgage stress will rise.

The impact of the fixed rate “mortgage cliff” is illustrated in the next chart from the latest RBA Financial Stability Review:

It shows that scheduled mortgage repayments will lift to an all-time high share of household income once the fixed rate mortgage reset runs its course.

The impending financial pain can be reduced by refinancing your mortgage to the lowest rate possible.

This is where the MacroBusiness Compare n Save home loan comparison service can help.

With this service, borrowers can compare hundreds of mortgages to potentially save thousands of dollars in annual repayments.

If you choose to proceed with an application, the team at Compare n Save will manage the process for you.

Try the Compare n Save comparison service for yourself. It is quick and easy.

For instance, if you are seeking a better deal on your existing mortgage, hit the “I Want To Refinance” button, enter the amount you wish to borrow and the interest rate you are currently paying.

The Compare n Save comparison tool will then illustrate in simple terms how much you could save by refinancing, alongside loan options.

View the available loan options and should you wish to move ahead with an application, hit the Enquire button, fill out your contact details and the team at Compare n Save will contact you to start the process.

As an example, consider a borrower seeking to refinance a $750,000 loan on a house valued at $1,000,000 and currently paying a variable mortgage rate of 6%.

They could save $406 per month ($4,872 a year) by refinancing to the lowest rate on offer:

The Compare n Save tool lists hundreds of mortgages to compare, ranging in cost from cheapest to more expensive.

If you proceed with a loan through Compare n Save, MacroBusiness will receive a share of the commission, which will help fund the site.

It’s unfortunate that the fixed rate mortgage cliff will push borrowers to the edge. However, at least the pain can be reduced by getting the best possible mortgage rate.