Climbing interest rates yet to bite most Australian mortgage holders, economists say

Australians with mortgages are so far mostly managing to cope with higher interest rates, but the full impact of recent rises is yet to be felt and increased costs for energy are still to take effect, economists say.

A gauge of financial stress run by credit analysis company Fitch Ratings found instances of people falling behind in mortgage repayments by 30 days or longer were at 0.82% in the June quarter, the lowest level in at least 20 years that its Dinkum RMBS Index has been running.

The unemployment rate, down to a 48-year low of 3.4% in July, was helping households keep up with repayments.

The savings rate, down recently from its Covid lockdown peak, was also higher than pre-pandemic levels, Vojvodic said.

Assuming commercial banks pass on the increase in full, a half-percentage point increase would add another $144 a month in mortgage repayments for each $500,000 borrowed, according to RateCity, a financial data firm.

Fitch said it expects home prices to fall for the remainder of 2022 and into 2023 as affordability remains constrained and borrowing costs rise.

Of the factors adding to stress, cost-of-living and personal debt woes were the highest cited, with 40% of respondents singling out those matters.

The latest weekly data from the Australian Institute of Petroleum said retail unleaded petrol prices averaged 172.9 cents in the week to 4 September, easing from 177.3 cents a week earlier.