source : www.9news.com.au
According to Finder, the minimum wage needed to comfortably afford a mortgage on the average home — which costs $926,899 — with a 4.35 percent cash interest rate is now $182,000.
That’s almost three times the average income of $65,000 last year, according to the Australian Bureau of Statistics.
The required salary drops to just under $130,000 to purchase the average $659,130 apartment, which is still well out of reach for a single-income household.
The current rate hike means borrowers with a $590,000 mortgage will pay an extra $1,345 per month compared to April last year.
“That’s a huge amount of extra money to spend on your mortgage, especially when the cost of almost everything else is also rising,” said Graham Cooke, head of consumer research at Finder, adding that mortgage holders were “already in trouble”.
While the increase was largely expected, it has led to significant criticism due to the disproportionate impact it will have on low-income people.
“The RBA’s decision to increase the cash rate to 4.35 per cent will hurt low-income people the most,” said Cassandra Goldie, chief executive of the Australian Council of Social Service.
“The valuable goal of reducing inflation should not come at the expense of jobs and incomes…
‘Rather than relying solely on the blunt instrument of rate hikes, the government must step in to help the RBA with measures to tackle inflation at its roots.
“This should include working with states and territories to curb rising rents and additional measures to reduce energy bills for those who can least afford it.”
Higher-than-expected inflation numbers late last month led economists to slam today’s rate hike, but subsequent data showed that gasoline prices — which are set internationally and not affected by interest rates — and rising mortgages are driving the higher cost of living .
The Housing Industry Association said the RBA should have waited longer before pulling the trigger on the 13th rate hike since May last year, saying economic growth was already slowing.
“The fastest rise in cash rates in a generation is the main driver of this poor performance in future growth indicators,” said chief economist Tim Reardon.
‘The RBA’s monetary policy tightening has not yet had a negative impact on lagging indicators of economic activity, such as unemployment or inflation.
“There were very long lags in this cycle due to the strength of the economy at the start of the RBA rate hike cycle in the first half of 2022.”
Reardon said the decision would result in fewer homes being built, despite the need for more supply during the housing crisis.
“Today’s rate hike is unnecessary and will cause a further contraction in new home construction, limiting the supply of new homes,” he said.
And that, he said, would make the average mortgage even less affordable.
source : www.9news.com.au