House prices have continued to rise in recent years amid record low interest rates, but this is not impinging on borrowers' ability to keep up with their payments, says Mortgage Choice CEO John Flavell.
"As the cash rate has come down, our customers have maintained their repayments and amortized their debts at an accelerated rate," he said. "The arrears rate on the portfolio was also diminishing in line with that."
In fact, Flavell noted that low interest rates could be stimulating pre-payments despite the continued rise in Australian prices. "The proportion of our customers that are in advance by one month or more on their mortgage has grown in recent times from 24 per cent to over 27 per cent. Typically, they're in advance by nine months or so," he said.
According to the latest CoreLogic data, the home price index for Australia's capital cities rose 0.8 per cent in July from June. The latest data from the Demographia International Housing Affordability Survey also shows that the median housing price in Sydney was 12.2 times more than the median annual household income in the third quarter of 2015. However, data from Standard & Poor's in mid-July showed that the number of mortgages in arrears rose in May for the seventh straight month.
Flavell expects the Reserve Bank to further cut rates to a new record low of 1.5 per cent.
"The expectation is the RBA is more likely to cut than not," he said. "We've got a stubbornly high Australian dollar against a backdrop of easing across the globe and you would think then that the RBA would be rather pretty keen to address that."
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan