From squeeze to crush
In Westpac’s latest Economic Bulletin senior economist Satish Ranchhod says the pressure on household finances is set to become more intense this year with many borrowers due to roll off low fixed mortgage rates. The resulting large increase in fortnightly interest payments will take a big bite out of many households’ disposable incomes.
He says as interest rate increases ripple through the economy, house prices will continue to fall and domestic spending will decline. That will underpin a broader slowdown in economic growth, with unemployment rising over the coming years.
“The impact of these tougher financial conditions will be felt across the economy. However, there will be some big differences across household groups. Notably, those who bought their first home in the past couple of years will see their finances being squeezed especially hard.”
Interest rates
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