According to the AFR, Australia’s red-hot jobs market is preventing the country’s most indebted borrowers from falling behind on their home loan, as internal Reserve Bank research reveals nearly one in five borrowers may be in mortgage stress.
While unemployment nationally was 3.7 per cent in August, unemployment among homeowners was likely “almost non-existent”.
But markets ascribe a three-in-five chance the RBA board will deliver one more rate rise by the end of the year, amid concerns about persistently high inflation in the services sector and a stubbornly strong jobs market.
Strong employment growth and nominal wage increases have insulated borrowers from some of the financial pain caused by high interest rates. About 18 per cent of loans across the country have a high repayment burden, defined as spending more than 30 per cent of household income on paying down a mortgage, according to internal RBA research released under Freedom of Information laws.
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This has been another crazy week on the markets, as the truth of higher rates for longer has started to permeate not only bond markets, but equity markets too.
And after a stunningly strong U.S. jobs report bolstered the case for more tightening from the Federal Reserve, the U.S. Treasury yield surge that has shaken markets in recent weeks may have further to run.
As I discussed in my last show, US Jobs growth for September nearly doubled expectations as nonfarm payrolls increased by 336,000 for the month, strengthening views that policymakers will need to keep interest rates elevated to cool inflation.
That’s bad news for investors who were looking for a respite from a rise in Treasury yields that has wreaked havoc throughout markets over the past month, bruising stocks, supercharging the dollar and pushing mortgage rates to their highest levels in more than two decades. Treasury yields of course move inversely to bond prices.
The interplay between bearish fractals and potential bullish triggers continues to shape the unpredictable landscape. But we need to watch the unrealized losses among holders of bonds, because at some point the truth will out. And meantime, equities are still priced for a goldilocks soft landing, which is probably unlikely.
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Wall Street’s main indexes were poised for a sharply lower open on Friday after a strong jobs report deepened fears that interest rates may stay elevated for an extended period.
The Labor Department’s report showed non-farm payrolls increased by 336,000 jobs in September on a monthly basis, against expectations of 170,000 additions, according to a Reuters poll of economists.
Unemployment rate stood at 3.8% against expectations of 3.7%, while average hourly earnings increased 0.2%, compared with estimates of 0.3%.
The S&P 500 eyed its fifth straight weekly fall, while the Dow is on track to decline for the third straight week.
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My latest Friday afternoon chat with journalist Tarric Brooker, as we look at the RBA’s latest Statement On Monetary Policy, and the recent Bond Market dynamics.
And we look at the economic fall out on households if rates go higher for longer. Tarric’s charts can be found at: https://avidcom.substack.com/p/dfa-chart-pack-6th-october-2023
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Digital Finance Analytics (DFA) Blog
Laughing Or Weeping, We’re Back: With Tarric Brooker!
Despite all the hopium from the property lobbyists, the truth is more households are running out of runway with regards to their finances.
It has shown up in my latest surveys, with more than half of mortgage holders now struggling with cash flow, and 70% percent of renters in the same boat.
Next Tuesday on my live show I will be walking through the detail behind these numbers. But the pressure is also showing up in other statistics. For example, the Australian Bureau of Statistics last week revealed that value of household deposit accounts decreased by $6 billion in the June quarter, with it being the first decline in 16 years.
“This was the first fall in deposit balances since the Global Financial Crisis and indicates that the household sector was tapping into cash reserves amid rising cost pressures”, the ABS said.
The decline indicates that households are ‘running’ down savings built up during the pandemic to pay for bills and loans as a result of the Reserve Bank of Australia’s (RBA) aggressive interest rate hikes to fight inflation and the overleverage into property driven by weak lending standards and high prices. Something has to give.
Meanwhile, figures released by the RBA on Friday indicate a growing number of people are using their credit cards to cover the cost of increased bills, with the stock of personal credit having risen by 1.6% in the five months to August.
It seems to me the real pressures are now painfully obvious, and some are truly running out of runway.
But note, the RBA’s forward guidance on monetary policy was unchanged, stating that “some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.”
So, buckle up people, turbulence ahead.
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Today’s post is brought to you by Ribbon Property Consultants.
Digital Finance Analytics (DFA) Blog
Crash Alert: Households Are Running Out Of Runway!
A belated edition of our Monday evening rant with Edwin Almeida, our property insider. This week we explore the political shenanigans & follies, the latest numbers and some tips on beating the auction.
This is an edited version of a live discussion with Damien Klassen, Head of Investments at Walk The World Funds and Nucleus Wealth. Given the recent movements in bond yields, and the strong US$, markets are in the doldrums, and we will explore the current dynamics in play.
Original version here: https://youtube.com/live/VbBSqRZf3xo
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Caveat Emptor! Note: this is NOT financial or property advice!!
Digital Finance Analytics (DFA) Blog
DFA Live Q&A HD Replay: Investing Now With Damien Klassen
I caught up with Steve again following the RBA no change announcement on Tuesday, and we discussed the implications, in the light of new research from Canstar about the state of play of household finances.
Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.
A belated edition of our property Rant this week, as I am joined by Edwin to look at the latest news and data on the market. Listings seem to be wilting, rental properties are becoming as rare as Edwin’s chickens…
[Note next weeks Rant will also be released on Wednesday due to the long weekend in some states].
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Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
Digital Finance Analytics (DFA) Blog
Its Edwin's Wednesday [Monday] Evening Property Rant!
This is an edit of a live discussion with mortgage broker Chris Bates. Chris started as a Financial Adviser back in 2007 and sold his Financial Advice business in 2020. Over the past 9 years, Chris has grown into one of Australia’s top Mortgage Brokers and is passionate about taking the product providing industry to a trusted advice based profession.
In 2022, Blusk won the Connective Broker of the year award. Connective is arguably Australia’s leading and largest Mortgage Aggregator. Chris has been finalist for the past three years. Chris was #1 with most loans settled in NSW and #2 nationally out of over 3,500 brokers.
