Rise in “unaffordable” prices for 1 in 3

Many Australians with little wiggle room in their household budgets fear that they will soon be unable to afford basic expenses.

Almost one in three Australians who borrow or rent say they will not be able to afford housing costs if the Reserve Bank raises the interest rate as much as expected in the coming months.

The central bank is Tuesday widely expected to add an additional 40 basis points to the target cash rate as he attempts to stave off the sizzle of an overheated economy and rein in runaway inflation.

It would be the second hike in five weeks and – if ANZ economists are correct – just the start of a steep ramp to a cash rate of 2.5% by the middle of 2023.

Westpac Managing Director of Personal and Commercial Banking Chris de Bruin insists it’s just a natural revision that most will be able to afford after a long period of putting emergency policies in place.

But new research shows almost a third of Australian renters and borrowers cannot afford the potential rise in housing costs, and a further 25% don’t know if they will be able to afford the increase.

Of the 2,334 adults surveyed by Canstar, around 30 per cent said they would not be able to afford monthly home loan payments or rent if the average variable rate fell from 3.16 per cent to 5.31 per cent, according to to an increase in the cash rate to 2.5. percent.

Such an increase would increase repayments on a $500,000 loan over 30 years by almost a third, climbing from $629 to $2,780 per month.

Canstar financial expert Effie Zahos said 55% of those polled ahead of Tuesday’s ruling said they could not afford – or were unsure if they could afford – such a leap.

Almost a fifth could afford it, but they would have to skimp on other costs to get by.

“Consumers are currently facing higher costs on all sides,” Ms Zahos said.

“The Canstar poll gives a good indication that there is little wiggle room left in household budgets.”

The Canstar survey also found that 60% of Australians believed their wages would not rise enough to cover both rising housing and living costs, while 22% were unsure.

Less than one-fifth believe their salaries will increase in line with these costs.

“Australians are seeing price increases on several household bills,” Ms Zahos said.

“When you’re incurring higher costs on just about every household bill, juggling the extra costs can become difficult as consumers need to be efficient in redirecting the savings.”

“It’s not just homeowners who are making life difficult by repaying more of their loans.

“Although interest rates do not have a direct impact on rental values, they do have indirect consequences, which could drive rental prices even higher.”

Although the rising cost of living is putting further pressure on household budgets as wage growth remains slow, 40% of Australians favor an increase in interest rates, while 34% do not agreement and 25% are uncertain.

The main response among supporters of raising interest rates was that the Reserve Bank should raise interest rates to help reduce inflation and ease the cost of living over time (18%), while 12% said higher interest rates would help retirees. cover the rising cost of living through higher savings rates.

“It’s interesting to see Australians appreciating the importance of higher interest rates,” Ms Zahos said.

“They look beyond their pocket and try to get the big picture of the economy, with Canstar’s findings showing that Australians understand that to fight inflation interest rates need to rise.

“Higher interest rates will put pressure on households with mortgages – homeowners are no doubt hoping it won’t take too many rate hikes to find the balance needed to contain inflation.”

Governor Philip Lowe’s June RBA policy announcement will be released Tuesday at 2:30 p.m. AEST.

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