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First home buyers will be hit hard when rates rise over the coming months, according to the Investors Club.
The Club’s acting President, Richard Van Proctor, said some home owners, particularly those in Western Australia would come under significant mortgage stress when the Reserve Bank started to lift rates.
“People have taken advantage of the first home buyers grant and rushed in to buy properties because they got the deduction on stamp duty and they got the government subsidy,” Mr Van Proctor said.
“But as interest rates rise, the average person with their first home loan is going to struggle.”
The National Australian Bank (NAB) said the most likely path of policy will be three consecutive 25 point increases in November/December/February.
According to the bank’s latest monthly business survey and economic outlook, the official cash rate will sit at 3.75 per cent by early 2010.
After this, NAB predicts the Reserve Bank will make two further 25 point moves in August and September 2010, taking the rate to 4¼ per cent by year-end.
Over the last 12 months, the average first home loan has soared in every state and territory.
Western Australia has recorded the biggest leap, with the average loan rocketing up by $41,000.
In South Australia, loans have grown $22,000, while in Victoria loans rose by an average $21,000, according to the Investors Club.
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