Forced property sales predicted as rates continue to rise amid inflation and cost of living crisis

As homeowners grapple with four consecutive cash rate increases and inflation, a new survey reveals just how many Australians would be pushed to the brink with further rate rises.


Rising interest rates are pushing homeowners to the brink, with new research showing just over half a million Australians would struggle if rates were to increase by a further 3 per cent and almost a quarter of those would be forced to sell their property.


Daniel McQuillan, managing director of Nu Wealth in Perth, said excessive increases would negatively impact the WA property market, especially when many families were facing large increases in the cost of living with inflation in Perth now the highest in Australia at 7.4 per cent.


Despite this, he said forced sales would not be as prevalent in WA if interest rates rose by another 3 per cent because property prices in WA were still low compared to the eastern states.


A survey by comparison site Finder showed one in five respondents (19%) — equivalent to 551,000 people — would struggle if rates were to go up by 300 basis points, with 14 per cent believing they might fall behind on their repayments or other bills.


The financial pressure would lead 5 per cent — equivalent to 145,000 homeowners — to consider selling their home.


Only a quarter of those surveyed say a rate rise would not change their lifestyle or spending habits at all.

Richard Whitten, home loans expert at Finder, said some households were in a dire position as they struggled to cope with the worst cost of living crisis we’ve seen in years.


“After yet another cash rate increase, mortgage repayments for many borrowers are higher than they were a few months ago and likely to climb higher still this year,” he revealed.


“Through the rest of 2022, many homeowners on variable rates will start to struggle more and we will likely see the number of defaults rise.

“Those on fixed rates may not notice a difference now, but they’ll get a real shock once that rate stops and they are looking at a fixed-rate cliff.


Mr McQuillan said the economy in WA still remained very strong with the unemployment rate at near record low levels, and WA homeowners most vulnerable to rate rises would be those who do not have a proper household budget plan in place.


“Nu Wealth, for example, found that many FIFO workers lost their homes during the resource’s recession in WA a few years ago mainly because they had not a savings plan in place while that same time had no control over their expenditures,” he explained.


Raquel de Brito

The West Australian

Mon, 15 August 2022 1:08PM

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