Blueballs, this article is so wrong it's ridiculous. Firstly the RBA says that over 80% of Australian home loans are variable. Who's likely to be more accurate, someone from Raine and Horne Real Estate or the RBA?
Secondly the commentators grasp of figures is either extremely naive or extraordinarily rubbery.
For arguments sake, if 30% of mortgages were fixed 3 years ago it does not automatically follow we have a problem coming up for the following reasons: i. Not all loans would have been fixed for 3 years. It's the most common but other options included 1,2,4,5,7,10 and even 15 years. If the article was to be useful it would have provided accurate figures but we already know from the RBA that is not their purpose. ii. Not all loans would still be in place. A portion may have been closed out with sale of property, a further portion may have been refinanced (Aussies are refinancing on average around every 3 years these days, some figures suggest even less). iii. It is wrong to assume that the jump will be a savage impost on the existing borrower. For one thing they were savvy enough to lock in at very low rates in the first place. For another they have had the benefit of relatively better cash flow as a consequence over that time. Further the vast majority would have been economically sound in the first place and likely to be able to handle increased repayments. iv. The long term variable average in Australia is around 8-9% so it's only a bit above that at present and you can get fixed rates in the mid 8s. Easy enough to lock in for a further period, even if only 1-2 years, at rates that stand up as average on a historical basis.
Conclusion: Beat up.
I work in the finance industry. I'm sick of the stupid stories comparing us with the USA. The real differences are so palbable that they plainly reveal the commentators ignorance. Eg we have much lower default rates, much tighter lending practices (yes even for high LVR loans), much better managed portfolios, much smaller nonconforming/subprime sector.
The Australian banking industry is arguably the best managed in the world due to the disasters of the 1980s - we aren't immune to problems but they will be minor compared to other countries.
