Mortgage shock in store for many Aussies

Melissa Jenkins
(Australian Associated Press)

More than $100 billion worth of interest-only mortgages will expire before mid-next year, ramping up the pressure on home owners, a senior analyst warns.

USB economist George Tharenou says home owners switching from interest only (IO) to principal and interest (P&I) loans are in for a rude shock when their mortgage repayments swell by up to half.

“Those individuals switching from IO to P&I do face a material ‘shock’ with scheduled mortgage repayments jumping (effectively overnight) by 35 per cent to 50 per cent,” he said in a note this week.

An estimated $105 billion of interest only loans will expire in the 2018 financial year, and this will grow to $133 billion the following year and peak at $159 billion in the year to June 2020, Mr Tharenou said.

UBS has revised down its house price growth forecasts for coming years, and now expects home values to flatline next year and probably fall by up to three per cent in 2019.

Meanwhile, average home values fell by 0.2 per cent across the capital cities in the month to last Sunday, the latest figures from property data firm CoreLogic show.

Sydney dragged the national average down, given it was the only capital where home values reversed over the month, dropping one per cent.

Values improved 0.3 per cent in Melbourne and Perth over the month, were up 0.2 per cent in Adelaide and inched 0.1 per cent forward in Brisbane.

Last week was the final week of auction reporting for the year, with a preliminary combined capital cities clearance rate of 64.2 per cent, down from 68.3 per cent at the same time in 2016.



Sydney – $933,000

Melbourne – $755,000

Canberra – $655,000

Brisbane – $545,000

Darwin – $545,000

Perth – $520,000

Adelaide – $450,000

Hobart – $410,500

Combined capitals – $705,172

Sydney – $690,000

Melbourne – $559,500

Canberra – $431,500

Perth – $399,500

Brisbane – $385,050

Darwin – $385,000

Hobart – $363,750

Adelaide – $330,000

Combined capitals – $565,952

Source: CoreLogic Property Market Indicator Summary week ending December 17, 2017.


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