Australia’s recent interest rate increases are poised to impact consumer confidence and property market dynamics, but are not expected to significantly increase mortgage arrears, according to S&P Global Ratings’ latest RMBS Performance Watch: Australia. The report suggests that the majority of borrowers will likely prioritise their mortgage repayments over discretionary spending, helping to maintain low arrears levels. S&P Global Ratings is a leading provider of independent credit ratings, research, and analytics to the global financial markets. The company offers insights and benchmarks that help investors make informed decisions about credit risk.
While higher interest rates may dampen property demand as households postpone purchasing decisions in the face of economic uncertainty, investors with greater debt capacity and established property portfolios are expected to be less affected by the rate increases. This is expected to lead to a divergence in the market, with some segments proving more resilient than others.
However, S&P Global also cautions that some first-home buyers might accelerate their property purchases to take advantage of existing grant schemes. This could inadvertently increase their leverage, making these recent borrowers more vulnerable to future interest rate fluctuations. The ratings agency suggests careful monitoring of this segment of the market.
