RBA rate increases to hit lower income Pilbara households the hardest as mortgage repayments are set to soar

If you don’t work in the high-paying resource sector it’ll become harder to pay for your Pilbara property, as fixed-term mortgages catch up with interest rate hikes. On Tuesday the RBA raised the cash rate to 4.1 per cent, the largest increase in more than 11 years. The Australian Financial Complaints Authority recently noted that “hundreds of thousands” of Australians could be affected when fixed-rate home loans roll on to higher non-fixed rates in the coming months. Economist Dr Alan Duncan, of the Curtin Bankwest Economics Centre, warned that more than a quarter of WA households could be affected by the changes. “The RBA rate increases are going to have a significant impact on mortgage repayments for those that are going to come off (fixed) mortgages over the course of 2023,” Mr Duncan said. “If you look at the RBA’s data on the average rates for those that are currently on fixed-rate mortgages and the average rates for new fixed-term mortgages you’re looking at increases of up to three percentage points.” “More or less a doubling of the interest rates to be paid for by somebody who moves from their current fixed-rate mortgage onto a new fixed-rate mortgage.” “That translates to a potential a payment increase of at least 40 per cent.” “They estimate that around a quarter of all Australian homes are fixed-rate and would switch to a variable rate or another fixed term mortgage over the course of the year.” Dr Duncan said Pilbara residents who don’t work in the high-paying resource sector will face extreme pressure to make repayments as they switch to a variable or new fixed-rate mortgage. “The Pilbara is a very particular market for property, the average salary for people in the Pilbara is relatively high and we know that’s because of the prevalence of resources sector,” Dr Duncan said. “If you look at a typical property price and compare that with a typical income, affordability tends to be relatively strong in the Pilbara compared with other regional centres.” “However, we know that these averages conceal really strong inequalities in income. “If you’re not able to source those sorts of salaries, if you’re not part of the resource sector, then for you the cost burdens are more significant. “You’ll likely be spending more than a third possibly even 40 to 50 per cent of your income towards mortgage repayments, if you’re somebody on that level of income. “So while affordability for the Pilbara looks on average to be relatively reasonable, we know that people on lower incomes will be facing far more significant cost pressures.” In regional WA, dwelling values have increased 3.6 per cent in the past year, according to Core Logic data. Dr Duncan said Pilbara residents could face extra interest repayments of hundreds of dollars a month. “In relation to Karratha, we did some research recently, that looked at the the typical mortgage cost burdens faced by people in in the Pilbara,” Dr Duncan said. “The typical property price, or condominium property price in Karratha, according to data from CoreLogic, came out to be $530,000. “Imagine that somebody (is) on an 8 per cent loan over a term of 30 years, that means the mortgage payments might rise from around $2100 a month to more than $3000 or $3040. “Essentially, that’s an increase of nearly $900 per month on a mortgage payment for somebody.” The rate rise comes after a Pilbara News report last month on the “punishingly low” vacancy rates in the Pilbara rental market.