Conservative Conditions but Cause for Optimism in 2023

The most important thing to take away from the RBA’s recent rate increase and the likelihood of further increases, is that playing the long game will pay off when it comes to the real estate market.

As we move into next year, more and more fixed-rate mortgages are expected to end. In fact, 75% of these will have rolled-off by June next year, with 100% of current fixed-rate mortgages ending by June 2025.

Of the 75% of fixed-rate mortgages of around 2% ending by midway through next year, most will move to a variable rate, likely to be as high as 6% or above.

Combined with variable rate rises, some experts believe that by the third quarter of next year, more than 9% of disposable income will be devoted to mortgage payments. Some economists say this is equal to the peaks seen just before the Global Financial Crisis.

The good news for many Australians, though, is that many are ahead on their mortgage repayments. In fact, close to 35% of all borrowers have equal to or more than a two-year buffer on minimum payments. A further 25% have buffers of three months to two years.

There are, however, still many homeowners who are unable to meet mortgage repayments. This will naturally bring more properties to the market. As a result of this, as well as the RBA likely handing down further interest rate rises, we can reasonably expect more conservative negotiations to characterise the 2023 marketplace than some of the alarming scenarios portrayed by the gloomier outlooks.

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