The threat of a fixed-rate mortgage cliff has abated, but an increase in jobless numbers could be an even bigger problem, the Yellow Brick Road chairman says.
The threat of the fixed-rate mortgage reset sparking widespread distressed selling has somewhat abated, but rising unemployment is emerging as an even bigger risk to house prices, says Mark Bouris, money guru and chairman of Yellow Brick Road.
“I think what experts also underestimated at the beginning of the downturn was the power of the low unemployment rate.”and more people lost their jobs.“I think some people will be forced to sell when their fixed mortgage resets to higher interest rates, so we could see more supply over the next six to nine months, but that’s unlikely to be enough to cause prices to fall. But when you couple that with higher unemployment, that’s when we’ll start to see supply increase quite rapidly,” he said.
The unemployment rate is expected to increase sharply to 4.5 per cent next year once the impact of the interest rate rises has flowed through the economy, the RBA says.“I think the unemployment rate will overshoot the 4.5 per cent forecast, which means we’re likely to see more distressed sales as people lose their jobs,” Mr Bouris said.
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