After more than a decade of easy monetary policy from the Reserve Bank of Australia, new data shows more than 1.1 million Australian households have never experienced a cash rate rise.
The last hike in Australia was in November 2010 following the Global Financial Crisis.
Since then, the Reserve Bank of Australia has cut the cash rate 18 times by a total of 4.65 percentage points to where it sits today at 0.1 per cent.
According to Australian Bureau of Statistics (ABS) lending indicator data, 1,141,592 first home buyer owner-occupier loans settled during that period of time, meaning this group of homeowners have never faced RBA-induced higher mortgage repayments.
Sally Tindall, research director at RateCity.com.au, said a huge amount of people are going to feel the impact of a rising interest rate environment for the first time when the RBA eventually lifts the cash rate.
“It’s incredible to think there are well over 1.1 million households that have never experienced a cash rate hike,” Ms Tindall said.
“Australia hasn’t seen an RBA rate rise in more than 11 years, which means there is a generation of mortgage holders who could be in for a shock when their monthly repayments automatically start rising.
“While most people will be able to take future rate hikes on the chin, albeit through gritted teeth, for some people who have been hit hard financially by COVID-19 or who haven’t seen a decent pay rise in some time could find it difficult to balance the budget.”
Since the last rate rise in 2011, the average owner-occupier loan has increased $238,614 to $602,035, showing the impact falling rates have had on house price growth.
In that same period of time, NSW and Victoria have had the largest jump in average owner-occupier loan size, increasing $364,506 (88 per cent) and $271,254 (76 per cent) respectively.
Underlining just how strong the property market has been to finish 2021, new lending hit a record high in December with $32.81 billion in new mortgages settled, representing a 4.4 per cent increase from November.
Owner-occupier lending increased 5.3 per cent, or $1.13 billion, on November. Investor lending climbed to a record high of $10.34 billion, up $241 million, or 2.4 per cent, month-on-month.
Ms Tindall said that while the lending data remained strong, movement in the cash rate could slow buyer activity.
“The data shows the mortgage market is still in full swing, however, future rate rises could shake things up,” she said.
“The value of investor loans hit another record high this month, but the pace has notably slowed, which could be sign some of the heat is coming out of the market.”
