Interest rates beginning to bite: RAC
23 January 2008
Rising interest rates are beginning to take their toll on an increasing number of Western Australian home owners, according to research carried out by WA's leading membership organisation, the RAC.
The research, carried out in December last year by RAC Mortgage Find, revealed that rate rises had already impacted on four out of ten mortgage holders with 38 per cent admitting that they had already cut back on spending following a series of seven straight rises.
Interest rate rises were the major concern for respondents with 57 per cent identifying it as their main concern above other bills and security.
The research also suggested that some mortgage holders would be pushed to breaking point if there were further rate rises this year.
One in 10 mortgage holders surveyed said their spending would be significantly impacted or they would be forced to think much more carefully about their spending if there were to be a further rate rise in February.
However, this figure jumped significantly to 36 per cent if there were to be two rate rises and a to 55 per cent per cent if there were three more rate rises this year meaning over half of mortgage holders surveyed would be struggling financially.
And it would appear mortgage holders are bracing themselves for more rises as 92 per cent of the surveys respondents believed rates would increase in the next 12 months.
According to the Real Estate Institute of Western Australia, any further rises would impact mostly on modest income earners who had borrowed heavily to enter the market.
REIWA President Rob Druitt said Perth's significant increase in house prices over the last five years meant that many buyers had to adjust their expectations and increase their mortgage.
"These survey results underscore the need for people to be realistic in their expectations and to borrow within their means.
There's no good reason for people to be getting into financial difficulties if they get expert advice on borrowing and purchase property appropriate to their needs and circumstances," Mr Druitt said.
The survey also revealed that 15 per cent of mortgage holders surveyed were not currently comfortable with their level of debt.
Download the release