Get the Finder app 🥳

Track your credit score, free

Free

Moody’s worries the falling Aussie dollar could force an RBA rate rise, tipping some mortgage holders into danger

Posted: 1 August 2018 4:15 pm
News

A graph of falling numbers.

With household debt at record highs and mortgage stress on the rise, a cash rate hike is the last thing Aussie borrowers need.

The Reserve Bank of Australia hasn't raised the cash rate in well over a year, in part because Australian borrowers are drowning in debt.

But a new report from Moody's Investor Services warns that the falling Aussie dollar may give the RBA little choice. This is potentially a disastrous result for Australian home buyers, who have borrowed enormous amounts of money to buy property in the last few years.

According to the report, "Sustained currency depreciation is credit negative for Australia because it could bring forward a tightening of the country's monetary policy, making debt less affordable for highly leveraged households."

The Australian dollar has been falling steadily in 2018, from a high of 80 cents in January to a current low of 74 cents. This is a fall of more than 5%.

Graph depicting the fall of the Australian dollar against the US dollar.

Graph of the Australian dollar against the US dollar. Source: www.xe.com

All of the experts in finder's RBA cash rate survey believe the RBA will keep the cash rate at its historic low of 1.5%. But if the Australian dollar continues to fall against its US counterpart, a lift in the cash rate may be necessary to stave off inflation.

The real problem is that Australian household debt is at an all-time high, passing 200% of disposable household income. Mortgage stress is high and lenders are already raising rates without the RBA's intervention.

But so far the Big Four have kept rates steady (and in Commbank's case lowered them). A move by the RBA could change this.

Are you facing mortgage stress?

Mortgage stress means your repayments are getting too big for you to comfortably handle. The traditional marker is spending more than 30% of your income on mortgage repayments.

Macquarie Bank recently suggested as many as a million Aussie households could be close to mortgage stress, with even just a small rate rise enough to tip them into financial hardship.

If you're struggling to meet your repayments, you do have options:

  • Refinance to a lower rate. Compare mortgages and find a lower interest rate. Switching will help you save a lot in repayments.
  • Talk to your lender. Your lender doesn't want you to default on your repayments. Reach out, tell them your situation and they will try to help you. Your lender may offer you a temporary discount, a break from repayments and advice on sorting out your finances.
  • Consolidate your debts. If you have debt from credit cards and personal loans, it might be wise to combine them with your mortgage debt to have a single repayment (with a potentially lower rate).

Avoid mortgage stress by switching to a lower interest rate

Data indicated here is updated regularly
$
% p.a.
Offset account
Split account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Maximum Insured LVR Amount Saved Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback.
A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get up $4,000 cashback for their first application (Other terms, conditions and exclusions apply).
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
2.39%
2.39%
$0
$0 p.a.
60%
A very low variable rate for home buyers with 40% deposits or equity. This rate takes effect from 30 September for new and existing customers. You can get this rate if you apply today.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)
2.68%
2.69%
$600
$0 p.a.
80%
$2,000 to $3,000 refinance cashback
Get a competitive variable interest rate with no application fee or ongoing fees. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.44%
2.46%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest
2.39%
2.40%
$0
$0 p.a.
90%
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.
Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner occupier, P&I)
2.17%
2.20%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
Virgin Money Reward Me Variable Home Loan - LVR ≤ 60% ($750k+ Owner Occupier, P&I)
2.60%
2.77%
$300
$10 monthly ($120 p.a.)
60%
$2,500 refinance cashback
Buy your home and lock in a low rate for the first two years. Get a $2,500 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 28 August and settle by 30 October 2020.
IMB Budget Home Loan - LVR ≤80% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.61%
2.67%
$449
$0 p.a.
80%
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
loading

Compare up to 4 providers

Latest home loans headlines

Image: Shutterstock

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site