The current low mortgage interest rates have failed to offset the impact of rising house prices over the past year, and the implementation of interest rate hikes this month will further increase delinquency and default risks for mortgage loans says Moody’s analyst Natsumi Matsud. Specifically, the less affordable a mortgage becomes relative to household income, the higher the risk of delinquency and default.
The out-of-cycle interest rate hikes by the big banks will put further stress on housing affordability once they hit in November. Sydney and Melbourne will be worst hit says Moody’s.
In Sydney, where house prices climbed over the last year, households spent an average of nearly 40 per cent on monthly mortgage repayments, up from 36 per cent a year ago. Households with two income earners spent an average 29.3 per cent of their monthly income on mortgage repayments in October, up from 28.2 per cent at the same time last year.
