The worst combination you can hand a mortgage holder: Evolve quoted in Broker Daily

Broker Daily has covered what today’s Reserve Bank decision means for borrowers and brokers, and asked for our view on why the pressure is building from more than one direction.

The numbers behind the story are stark. Equifax has mortgage demand down 14.1 per cent year on year in August, the fifth monthly fall in a row, and first home buyer demand down 20.1 per cent. The MFAA puts a quarter of a per cent rise at close to $100 a month on a $600,000 loan, and about $13,000 off the same household’s borrowing capacity.

My point to Broker Daily was that a rate rise is a brake on one wheel, and it is the wrong wheel. The government has far more tools than the Reserve Bank to manage demand, and in May it pulled them in the wrong direction by raising taxes on property investors and lifting spending in the same Budget.

Raising taxes and raising spending at the same time is the worst combination you can hand a mortgage holder. They pay the higher tax, they pay the higher repayments, and the inflation they were promised relief from is still there.

As I told Broker Daily, the borrowers feeling it most are the ones with the least room to move: first home buyers watching their borrowing capacity shrink while investors with tighter budgets move into the same lower-priced homes. If your numbers were tight before today, they are tighter now. Run them properly, and have the conversation with your broker before Christmas rather than after.