With Fixed-Rate Mortgage Pain Looming in 2023, the Australian Economy Is on Edge

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Hundreds of billions of dollars of mortgage debt fixed at record-low rates in 2020 and 2021 are set to mature in 2023, potentially causing considerable financial pain for Australian borrowers. 

This could be particularly challenging for those already struggling with their finances due to the impact of the pandemic.

The potential impact of the A$370 billion worth of home loans set to mature in 2023 is an issue that could have serious financial repercussions for many Australians. Many people struggle to meet their current mortgage repayments even with record-low interest rates. If interest rates rise as predicted, these borrowers could face an even more significant financial burden when refinancing.

Home values in Sydney have fallen 12% since the beginning of 2021, with further losses expected as distressed properties hit the market even more. Eliza Owen, CoreLogic’s head of research, has predicted that the trend could continue as more and more homeowners find themselves unable to refinance their mortgage debt when it matures in 2023.

This is due to historically low-interest rates, meaning that any increase in the cost of borrowing could cause strained borrowers to struggle even more.

“While most borrowers are expected to be able to continue servicing their mortgages, there could be more motivated selling if mortgage arrears rise from record lows,” said Eliza Owen.

Homeowner Francesca Lemon is all too aware of the financial pain of rising mortgage repayments. She has already seen her variable-rate mortgage increase by A$1,200 per month this year.

With unemployment still high due to the impact of the pandemic, Francesca is facing a real challenge as she struggles to make ends meet.

The looming threat of further increases in repayments when her loan matures in 2023 is causing even more stress for Francesca and many others like her. With economic uncertainty still surrounding the country, interest rates are expected to rise. This could lead to increased mortgage arrears and distressed selling as people try to secure an exit from their debt trap.

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