For owner-occupiers with variable-rate loans, the Reserve Bank estimates that around 5 per cent “are in a particularly challenging situation, where the combined total of their essential spending and scheduled mortgage repayments is more than their income – that is, they have a cash flow shortfall” Michele Bullock, the RBA governor said yesterday.
“Although this group is fairly small overall, those in it have had to make quite painful adjustments to avoid falling behind on their mortgage repayments” she said.
“This includes things like cutting back on their spending to the more essential items, trading down to lower quality goods and services, dipping into their savings or working extra hours.
“Some may ultimately make the difficult decision to sell their homes.
“A really important point to note here, is that lower income borrowers are over-represented in the group of people who are really struggling.”
The Reserve Bank will publish its Financial Stability Review on September 26.
Bullock was speaking at the Anika Foundation.