EDITORIAL || Interest rates warn a sobering one | Avocado


A warning about the potential for interest rate hikes over the next two years is a warning many on the coast should take seriously. It is something that is likely to quench the urge of a few to dive headlong into the housing market. And it doesn’t have to be. But it should inspire you to think very carefully about where you would be in the event of an interest rate hike, which could dramatically increase the burden on many mortgage holders. The warning comes from Isaac Poole, a Burnie-based international investment expert who works with global firm Oreana Portfolio Advisory Services. He says the group has a strong belief that banks will begin to raise standard variable mortgage rates regardless of any movement in official Reserve Bank rates. Dr Poole said household indebtedness had increased and a sharp rise in mortgage rates could pose a considerable challenge for marginal borrowing households. “The downside risk is that an increase in defaults or non-performing loans leads to a tightening of credit standards, a reduction in credit availability and a correction in house prices,” he said. . It’s a warning to people not to go beyond a point where you can manage your mortgage payments even if they increase dramatically. Some will still remember the days of double-digit interest rates, and while there is no indication of where we are headed, even a moderate hike would devastate many in today’s housing market or those who have recently purchased but are already nearing their limit. . The news this week that many Tasmanians with mortgages are living under mortgage stress is a concern with this kind of prediction. Analysis from Digital Finance Analytics indicates that a “perfect storm” had led to rampant mortgage stress with rising house prices, weak wage growth and interstate buyers exacerbating the problem. With this situation not expected to subside anytime soon, the Great Aussie Dream continues to be just that for many. What do you think? Send a letter to an editor

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