With prices rising for everything from petrol to canned vegetables, and now interest rates rising, are homeowners in Western Australia ready for changing economic conditions?
A Bankwest analysis of mortgage repayments found that increased savings and low interest rates throughout the COVID-19 pandemic have put homeowners in better financial shape than they were before the pandemic.
Bankwest looked at the position of home loan repayments over the past 22 months and, comparing the figures to 2019 levels, found that 90% of customers were ahead of their home loan repayments in March 2022.
Bankwest also found that the surge in home loan repayments was largely due to rapid adoption of home loan clearing accounts, which grew 63% from June 2019 to March 2022, nearly triple the growth rate. personal savings for the period.
Lucy Baker, an urban residential sales consultant at Realmark, said most households took advantage of strong economic conditions to pay off excess mortgages and were better positioned financially.
“A minority may have borrowed more money than they can afford in the long term or may not have emerged from the COVID-19 pandemic with increased savings – the virus has impacted each individual differently,” said she declared.
“There may be challenges ahead, but good job prospects here in the state are promising and should provide security for homeowners.”
Realestate 88 Inner City manager Brendon Habak said many homeowners and investors were ready for the rise in interest rates because they had saved well during the pandemic to counter expected rising costs.
“Low interest rates and repayment requirements, more savings placed in clearing accounts, fewer international holidays and strong weekly rental income mean that cash flow during the COVID-19 pandemic has been pretty good,” he said.
“The majority of WA homeowners have had good jobs during the COVID-19 pandemic, along with smaller mortgages than interstate homeowners.
“They are in a better position than they were pre-pandemic to weather a series of interest rate hikes.”
Ms Baker said buyers had not bought to their full capacity despite low interest rates bolstering their borrowing power.
“Bank valuation rates have a buffer of 2.5% above the market rate at a minimum, some banks are even valuing 3% higher,” she said.
“While homeowners enjoyed savings with record interest rates, banks factored in ease of maintenance beyond those rates, as did most homeowners.
“I don’t expect to see forced selling with these gradual rate hikes.”
With the cost of daily living and utilities rising, Mr. Habak said homeowners need to tackle their budgeting and savings goals.
“Simple changes in lifestyle choices can easily offset rising interest rates,” he said.
“Looking at your lender’s mortgage rate, your insurance premiums, your monthly subscriptions, as well as how often you eat out, etc., can lead homeowners to be in a similar net position or sometimes better.
“Budget monthly to see where your quick spending is happening. Small changes in your spending, as well as your savings goal, can make a huge difference.
Ms Baker said buyers and sellers should consider the impact rate hikes could have if they traded during this time.
“First of all, if you’re in the market and considering deals, checking the buyer’s finances is paramount,” she said.
“If the potential buyer of your property is pre-approved, consider when they were pre-approved and if their borrowing limits may have changed.
“This should continue to be a priority for sellers as rate hikes ramp up to normal levels to minimize the risk of deal failure, which could potentially hamper a seller’s sale outcome and he or she cost a lot of money.”