Australian economists estimate that Australian households have saved more than $200 billion through lockdowns. This has created a large amount of liquid cash which can be used to deposit money for a purchase of a property. An average Australian has substantial savings. Many homeowners have 30% more equity today than they did two-years ago, thanks to rising property values. The average Australian is now wealthier than ever thanks to these two factors, as well as a strong performing superannuation portfolio and shares portfolio. With $2 billion in loans for all residential properties, the total Australian residential property market has a value of close to $10billion. Even though some homeowners may find it difficult to repay their mortgages or worse, default, there is little risk to Australia's residential real estate market. Recent Covid data shows that banks will not take over your house if your mortgage payments are late. They will assist you in every way possible, including extending your mortgage terms or giving mortgage repayment holidays.
No Real Mortgage Stress for Homeowners
There has been much discussion about mortgage stress. However, there isn't enough evidence to support this. Although some first-home homeowners may have borrowed too much or overextended their budget to buy the wrong property, overall the number of borrowers who are in serious financial trouble is very low. Over half of homeowners don't own a mortgage. Half of homeowners with a mortgage pay less than the rest. In fact, there are more offset and redraw accounts that cost $1.3 trillion.
Inflation is bad for the economy. It reduces purchasing power, devalues savings and damages the economy. It can also be destructive and adversely affect those most at risk. We must find a way for inflation rates to return to the target range of 2 to 3 percent. It doesn't take long to reach that goal. However, rates will not rise to neutral levels immediately. They will return to the level they were at three years ago, when there was very little mortgage stress.
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