AMP senior economist Diana Mousina said that, for now, the risk appeared to have diminished.
“I don’t foresee any levels of major distressed selling in Australia,” she said. “If we do have a major downturn … that’s a big risk factor. [But] I think it’s a small probability,” Mousina said.
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“There’s been an increase in arrears … but consumers have managed to not have to sell their homes. They’ve cut back on spending … they’ve asked their family members for help, they’ve taken on more hours at work if they have that potential,” she said. “But we have seen some implications from the fixed rates, but it hasn’t been as bad as the fixed rate cliff.”
Aird said the resilient savings buffer in offset and redraw accounts made a high rate of mortgage delinquencies less likely.
“It’s a good thing for financial stability. It means many households have money sitting against their loan which they can use if they get into financial difficulty,” he said.
The reduction in savings in other types of accounts was being used as a buffer against rising cost of living expenses, Aird said.
Atelier Wealth managing director Aaron Christie-David said few borrowers were comfortably ahead on their mortgage, and those who weren’t were draining other savings and cutting back.
“There’s a small percentage that are doing quite well. They’re ahead by a few months and they have good incomes,” Christie-David said. “The other 80 per cent are working families burning the candle at both ends and the savings are taking a big hit. I see it everywhere I go. Cafes empty, when the kids go to swimming the classes are nearly empty, when I go to the gym it’s half full.”
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Red Maple Finance director Nariman Amalsadiwala agreed that borrowers were cutting back.
“I’ve seen people cutting back lunch or dinner visits to restaurants or takeaways,” he said.
Amalsadiwala said his clients were avoiding withdrawing money from their excess mortgage payments and delaying any big spending decisions.
“Redraw balances and offset balances, there are still quite a good amount of people who have those balances growing,” he said. “The reason why some of the people are growing those balances, people are putting off their decision to invest or upgrade. I have clients who want to upgrade their family home [but] they are scared of the high interest rates.”
Aird said home owners didn’t want to go backwards and would do what the could to keep their repayments up.
“Households built up a lot of buffers in the pandemic, and they’re trying to stay ahead,” he said.
Christie-David agreed borrowers wanted to avoid a feeling of going backwards.
“When rates are at 6 per cent they’re going to put their money in their loan,” he said. “When it’s in the loan, it’s a mental barrier. ‘I’ve put this money in my mortgage,’ and they won’t touch it.”