More pain awaits one fifth of Australian mortgage holders who signed up for a home loan during the pandemic period of ultra-low interest rates, as their fixed rate mortgages would roll over by the end of the year.
During that period, most of the home loans taken out sat at interest rates of 1.75% to 2.25%.
Since then, however, the Reserve Bank has aggressively raised the OCR in an attempt to tame skyrocketing inflation, which hit 7.8% in the year to December, news.com.au reported.
Further OCR hikes would only worsen the issue as borrowers on fixed rates can expect their rate to more than double to around 5% to 6%.
Finance Minister Katy Gallagher said she was “mindful” of how that would impact homeowners and businesses.
“We’ve always said 2023 will be a challenging year - dealing with the inflation challenge really for the government is a key economic challenge,” Gallagher told ABC Radio.
But despite warnings further rate hikes could spiral the economy into a recession, she acknowledged Australia was not immune to the global challenges.
“We are not pretending there are no challenges … but we also have very low unemployment, we’re getting good prices for the things that we sell,” the finance minister said. “The government needs to remain focused. Obviously, we’ve got a budget to land. And we’re in the middle of doing that. Some of those decisions are really key to making sure we work with the Reserve Bank, not against it, and supporting the economy where we can.”
Gallagher said health and cost-of-living relief were to be a major focus of the budget, news.com.au reported.
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