My Bui

If people still have jobs, that means they can still service their mortgage.

And look at the unemployment rate in Australia.

It has gotten a bit higher lately to 4.5%, but that's actually much lower than the pre-pandemic average between 5% and 6%.

Overall, the labor market is still okay, wages growth is still okay, and that means people can still service their mortgage.

And then one final point in terms of negative equity that I kind of want to mention is that, yes, it might be the case in certain suburbs, in certain segments of the market, particularly in Sydney and Melbourne, but it will be a temporary dip.

So we do see national prices fall.

falling by 5% between now and June next year.

But after that, we'll see a bounce back in prices again.

So negative equity, even if it happens, it will only be a year max, and then you go back to positive equity.

Yeah, I think so.

Basically, if you look at an average, say, mortgage in Australia, it ranges between $600,000 and $700,000, which seems reasonable for a first home, I guess.

So every single rate hike from the RBA would basically add about $100 to $110 to your monthly mortgage payment.

So over the last three months, the RBA has hiked rates three times.

So that's added $360 to your monthly payments.

We actually do see one to two more rate hikes to come.

So that's actually quite a sizable chunk that's added to the monthly mortgage payment if you're under that squeeze.

I think we'll definitely see a little bit more of an increase in delinquencies or arrears or basically the count of people who cannot pay their mortgage on time in Australia.

That's part of the immediate impact coming out of these rate highs.

But on a macro level, we were starting from a rather low base in Australia.

There will be some more mortgage stress in the market, but I don't think it will get to a level when the RBA has to worry too much about people plunging into a recession or it would damage our financial stability in terms of the macro banking system.