Rate Rises To Cause More Defaults
SMH has brought forward a report conducted by Fitch Ratings showing as the interest rate climb over the next year, it will only undermine residential backed security bonds as mortgage defaults would too keep rising. Fitch has shown that along with the three rate rises in a row up until now, this years forecasted rate rises will cause a 1.5% increase in mortgage defaults. As the rates increase monthly repayments, the rate of delinquencies would be in turn rise.
Simon Reibelt from Oasis Home Loans Northern Beaches pointed out that anyone with current mortgages should always allow for rate rises, especially in light of what is predicted with strong growth in 2010. If customers are currently paying a higher rate, there is an option to refinance down and reduce payments.