PowerHousing Australia which represents 38 of the large growth and tier one Community Housing Providers (85,000 homes nationally) is available to provide brief statement for media in advance of Federal Budget and Budget Lockup on Tuesday 25 October 22.
- Australian households are at the crossroads with interest rates rising at levels which will push Australians into crisis over the next financial period.
- Mortgage holders will be squeezed out by interest rate shock in over the next year as 2/3rds of all fixed rate mortgages are reset with fixed rate reset shock to higher rates over the next 14 months.
- Fixed rate refinancing shock:
- The indicator 3-year fixed mortgage rates have increased from 2.25% in September 2020 to 6.05% in October 2022.
- The markets are pricing in a further increase in interest rates of 1.5% over the next 12 months.
- According to the RBA, around 35% of outstanding mortgages are currently on fixed-rates, and around two-thirds of these loans are due to expire by the end of 2023.
- An outstanding $500,000 mortgage moving from 2.25% fixed rate to a 6.05% variable rate will see their mortgage repayments increase by more than $1,000 per month.
- For those that bought at the tail end of the recent boom up to December 2021 with mortgages close to $1m, the increase at fixed rate reset is much greater.
- Rents are set to continue to rise amidst the tightest rental market in recent memory.
- Variable rates:
- From September 2020 to September 2022, indicator variable mortgages rates have increase from 4.52% to 6.77%.
- Assuming an outstanding mortgage of $500,000 on a 20-year repayment plan, the previous two years has seen the variable monthly mortgage repayment increase by $640 per month.
- If interest rates increase as predicted, the previously mention monthly repayments will increase a further $440 per month.
- Growth affordable housing provision can be supported by institutional investment in partnership with CHPs and State Governments.
- This budget can provide further comfort to those particularly in rental stress that we are past the worst of the crisis and stable housing is now available.
- Bring all investors, superannuation funds, developers, market, affordable and social housing (CHPs) to the table, to consider the whole housing continuum.
- Focus on institutional social and affordable housing that operates into perpetuity, and only incentivize institutional rentals for aspirational professionals once the affordable end of the housing continuum is being addressed.
- Build a long term Housing Australia Future Fund (HAFF) with the following features:
- PowerHousing Australia Members and Affiliates assisted the formation of the 30,000 home HAFF policy and confident in growing an affordable housing asset class that has operated for decades as it does in the United States.
- The HAFF can create a pipeline of social and affordable housing supply, accelerating over the first five years of the fund. Whilst it will be slow to start with potentially only 3-7,000 homes delivered in the next two years. This pipeline can gather investor momentum.
- If this investment pipeline is partnered with CHPs, it could grow to 10-12,000 homes per year in year 10 and in excess of 20-30,000 homes delivered per year by year 20.