As the RBA revealed its latest rates call today, it was told to pay close attention to a “deeply concerning” rise in national mortgage default risk.
The Reserve Bank elected to keep the cash rate on hold at 4.35 per cent, after three rate hikes earlier this year.
The Finance Brokers Association of Australia (FBAA) pleaded with the RBA not to increase rates today, saying it must “consider the real world, and in the real world people are hurting and mortgage stress is rising”.
It pointed to new data by comparison group OurTop10 that shows an 18 per cent increase in national mortgage default risk.
FBAA CEO Leo Gagic has urged borrowers under pressure to seek help before they miss a repayment.
“These findings are not unexpected, as our own published research dating back to 2021 found that thousands of borrowers were vulnerable to even modest interest rate increases after a prolonged period of low interest rates,” he said.
Mr Gagic said the rising risk of mortgage default reflects the combined impact of higher interest rates over recent years and escalating living costs, with many households reaching a financial ‘tipping point’ after years of drawing down savings.
‘We’re in a property recession’: Buyer’s agent warning
This comes as a buyer’s agent says one of Australia‘s biggest markets is already in a “property recession”.
The RBA is widely expected to announce the cash rate will be kept on hold at 4.35 per cent, which would be a relief for households who have been hit with three rate hikes this year.
But it might not be enough to steady the ship. Price Buyers Agents founder Glenn Price sent his followers a note on Monday morning declaring “we’re in a property recession” — warning more than 60 per cent of auctions in his region of south-east Queensland were failing to sell.
“This weekend I went to seven properties, all between $950k and $1.1m, the kind of price point that used to have buyers lining up like it was free drinks at a nightclub,” he wrote.
“At more than half of them, I was the only one there.
“Just me and the real estate agent standing around watching tumbleweeds.“That’s not a slow market. That’s a market that’s stopped.”
Brutal message for panicking homeowners
The Barefoot Investor has also sent out a blunt message to Australian property owners panicking about falling house prices.
For the bestselling author and finance commentator, this is exactly what the country needed after years of unchecked growth.
Scott Pape says the property downturn is a long-overdue correction that could finally give younger Australians a fighting chance after decades of prices racing ahead of wages.
“House prices are falling, and that’s a good thing,” he said.
“For anyone under 40 who’s given up on ever owning a home, this is the best news since your dad stopped emailing you the auction results with ‘food for thought’ in the subject line.
“Yet for a real estate agent with an Audi lease, it’s the end of the world.
“Heck, if you listen to the property industry you’d think the sky was falling.
“Worst auction day in 30 years!’
“‘Property panic!’
“‘Sharpest correction in 40 years!’
“So … let’s check the scoreboard.
“Over the June quarter, prices across the combined capitals slipped by just 2.5 per cent. Over the past year they’re still up 3.9 per cent, according to Cotality.
“What is true is that at the moment, the market is colder than a mother-in-law’s kiss.”
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He went on to explain reality in clear-as-day terms to those worrying about losing out.
“If prices were to fall 10 per cent … they’d still only be back to where they were in late 2024,” he said.
“Some perspective you don’t get from the outraged: Average house prices have increased by more than 400 per cent since 2000, partly on the back of taxpayer-funded landlord welfare. They’ve grown much faster than workers wages. Which is why we’re in this pickle.
“My view? This is a correction we’ve needed for 20 years. The government set out to make property investing less attractive, and they get the gold star.
“For a new property investor, the income is less than they’d get on a savings account. The only way the sums ever worked long-term was the price going up at a constant clip. Take that away and you’re volunteering to fix someone else’s dishwasher at 9pm on a Sunday.”
Mr Pape pointed to recent polling data that showed a majority of homeowners thought falling prices was a good thing overall.
“And the public (as usual) is streets ahead of the politicians here. A Resolve poll found 61 per cent want prices to fall. Yes, even homeowners. Which sounds kind of mad, a couple hoping their biggest asset drops in value … until you clock the 28-year-old still asleep in the back bedroom,” he wrote, criticising Australia’s broader real estate culture.
“Somewhere along the way we started treating houses like a share price. Something to check, brag about, and borrow against. We forgot what they’re actually for. A house is for living in. So when the news runs around with its hair on fire about ‘the crash’, look at who’s actually panicking.
“It’s not the young couple who might finally get a foot in the door. It’s the bloke with the Audi lease. Let him sweat.”
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The big slowdown
The comments come as falling prices, rising listings and weaker investor demand shake the Australian property market. But cheaper prices have failed to trigger the rush of first home buyers some expected.
According to Phil Symmonds, founder of property tracker Spachus, there was “no data to suggest first home buyers were joining the market” in droves either before or since the May 12 federal budget.
Melbourne recorded 10,691 sales below $1 million between February and May 12, compared with 4820 since the budget. Almost 75 per cent of those transactions since May 12 sold below asking price.
Sydney’s sub-$1 million market fell from 3560 sales to 2125, while the $1 million to $2 million bracket dropped from 4439 to 2243.
Brisbane’s under-$1 million sales fell from 2766 to 1401, while sales between $1 million and $2 million dropped from 3138 to 1471.
“There is no data to suggest first home buyers were joining the market before budget night and definitely not after either,” Mr Symmonds said.
Aussie Home Loans revealed in early July there had been 20 per cent less applications from first home buyers since the budget, and 25 per cent less investor loans.
Auctioneer Tom Panos said the lower price point was “the marketplace that’s performing the best”.
“And I can only put that down to two factors,” he said.
“One is the 5 per cent deposit scheme. And the second thing is the lower price point attracts more buyers.”
But he cautioned against suggesting that meant the cheaper end was booming.
“You can’t just throw broadbased comment and say ‘all the lower end is doing good’ or ‘the lower end is doing bad’, because it’s very fickle.
“But overall the lower price point is better.”
‘Not looking good’
SQM Research managing director Louis Christopher said first home buyers were not exactly flooding into the falling market.
Listings surged 12 per cent in July, despite winter traditionally being a quieter period.
In western Sydney, combined asking prices across houses and units were down 3.5 per cent in the quarter to August 4, while new listings hit their highest July level on record.
“It’s not looking good in terms of the immediate outlook,” Mr Christopher said.
And while agents were still reporting first homebuyer interest, he said the broader direction remained clear.
“The market’s still falling in their areas. In some cases, the falls are becoming quite sizeable now. So there might be first-time buyers, but are they holding the market up? Nope, they’re not.”
Property consultant Cameron Kusher has forecast national property prices to drop by up to 2 per cent by the end of 2026 before falling between 10 and 12 per cent by December 2027.
“That would be the largest downturn we’ve seen in more than 45 years,” he said.
“I also think that speaks to how moderate downturns typically have been, though, as well.”
Read related topics:Cost Of Living