This week, the RBA increased interest rates from 4.10% to 4.35%.
With another set of increased rates, many Australians, not just the financially vulnerable, but also employed people and families, are now facing further strains to their finances, especially to homeowners.
According to various financial counsellors, Australian homeowners are prioritising their income towards their home loans, some spending more than 30 percent on their housing budget, while leaving other bills and necessities later.
In addition, with the increased rates, the number of borrowers “at risk” of facing mortgage stress could rise to 30.4 percent, estimated to equal to about 1.64 million people. And if the RBA chooses to raise rates again in June by another 0.25 percent, the amount of people at risk would increase by almost 300,000.
One of the reasons why interest rates have increased so much this year is attributed to the war in the Middle East, where rising fuel prices have caused many to believe it being the main reason for inflation.
However, even before the war erupted, the RBA was already concerned about the inevitability of inflation.
The RBA has forecasted that inflation would peak at around 4.8 percent sometime in the middle of this year; while economic growth would half, from 2.6 percent to 1.3 percent by the end of the year; and the rate of unemployment would increase from 4.3 per cent to 4.7 percent over the next two years.
These figures were modelled after potential scenarios that would affect Australia’s economy if the conflict in the Middle East continued, such as the continued blocking of the Strait of Hormuz, or further damages to the Middle East’s energy infrastructure and production.
While these scenarios would have slight differences in their effects regarding Australia’s economy, it was concluded that inflation and unemployment would worsen as the war continues.
As of the present, the major banks of Australia have stated that while lending and delinquency are still low, more Australians are attempting to buffer and finding repayment options before their mortgages become defaulted.
For those who are experiencing any financial difficulties, it is recommended that you call your bank provider and ask for support.
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