Mortgage stress is likely to rise in the next six months, despite the fact that the cash rate has remained unchanged, according to the Commonwealth Bank.
The banking giant made the prediction during an economics committee hearing in Canberra this week, as part of a review of the ‘big four’ banks.
The bank told the inquiry that the unemployment rate is likely to reach four per cent as a result of inflationary pressures, including the rising costs of basic goods, such as food and utilities.
This, they said, would be compounded by rising home loan repayments, putting an increasing amount of pressure on borrowers.
The bank also believes that lower growth in net lending could also have implications for the cost of servicing debt and would have implications for credit exposure to highly leveraged borrowers.
As Chief Executive Matt Comyn, appearing via video link as he recovers from Covid, informed a committee, around 60 per cent of the impact of the 12 interest rate hikes since May 2020 had reached the Australian economy, meaning mortgage stress could become more of an issue in the future, even if there are no further rate hikes.
He further discussed how various groups of people in Australia were being affected by the rising cost of living due to high inflation and interest rate hikes.
“I don’t criticize the increased cash rate put on households as a result of the risks of persistently high inflation, but understand that it is entirely appropriate,” Mr Comyn.
He stated although Australian households are experiencing difficulty keeping up with their mortgage payments, there has still been a minimal number of defaults on loans. He also estimated that by the end of the year, 85 percent of the consequences of the economic downturn will have been felt, resulting in increased pressure for households.