The massive hike in interest rates imposed by the RBA in its attempt to squeeze out inflation is not hitting all household cohorts’ to the same extent. Indeed, some older households with savings and no mortgages are enjoying their wealth boost, after years of low rates eroded their incomes. It is worth noting that the rate of rate increases is the sharpest lift in mortgage rates on record.
Overall mortgage stress, defined in negative cash flow terms has never been higher, as we discussed in our recent live show.
Within that, the consequences are perhaps most profound for younger, often more leveraged households. Indeed, the 2023 Risk Radar Report from credit bureau Experian shows that recent first home buyers that purchased in 2019 or later are suffering the highest rates of mortgage stress, as well as missed payments.
A decline in living standards will most acutely be felt by younger cohorts, as well as those with big mortgages held into retirement and beyond.
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