RateCity research director Sally Tindall said potential buyers had already faced cuts to their borrowing capacity.
For an average single-wage earner,paid $92,030 a year,who has no dependents,no additional debts and minimal expenses,their borrowing capacity has already fallen by $138,900 since April.
Buyers will still face affordability issues despite house price falls.Credit:Luis Enrique Ascui
Another affordability challenge this year will be that homeowners on fixed interest rates are facing a mortgage cliff,or higher repayments when their fixed term ends.
A homeowner who took out a fixed-rate loan of $500,000 that finishes in July would face a rise of $1,365 per month in repayments if they don’t renegotiate,RateCity’s analysis showed.
Those who borrowed $1 million face a jump of up to $2,722 per month in repayments from July.
“The housing affordability issue is a double-edged sword really,” Tindall said. “Basically prices are dropping which is ultimately a good thing for people looking to buy.”
But falling house prices were an issue for homeowners looking to refinance,including those on a fixed rate that expires this year,she said.
Some will be facing the tough reality that their home is worth less than they paid,making it difficult to qualify for another loan at a better rate.
Homeowners on fixed rates should speak with a mortgage broker or bank to see if they can secure a better deal once their fixed rate ends,and make extra payments now to get ahead,Tindall said.
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Melbourne-based 40Forty Finance director and mortgage broker Will Unkles said borrowers should plan for rising repayments.
Clients were already getting in touch to discuss options for when their fixed term ends,he said,and some are considering fixing their loans.
“Some clients are saying we need to pull our heads in on spending because our mortgage is going to be taking up 50 per cent of everything,and that’s a very stretched position to be in,” Unkles said.
“My best advice is two key items - do the numbers on what your repayments are expected to be and then pay the loan as if it was that rate.
“Then it’s not a shock when your rate jumps to that level and if you need a buffer,then you’re not going to be on your knees,” he added. “If it is going to be too much to repay,then look at selling near the end of your fixed term and downsize into something more affordable.”
While housing affordability will be a challenge in 2023,ANZ senior economist Adelaide Timbrell said there may be some relief in sight because she expects interest rates will be cut by the end of 2024.
ANZ is predicting house prices will have fallen nationally by 18 per cent,after the cash rate peaks in May at 3.85 per cent.
The cash rate could then be cut by the Reserve Bank of Australia by the end of 2024,to 3.35 per cent,Timbrell said.
“I don’t think rates will go back to[the record lows] they were during COVID,” she said.