(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.
CAPITAL CITY PRIVATE TREATY MEDIAN PRICES
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.