Residents feel financial pain as interest rate rises add stress to households

Southbank residents are weathering a storm of continuing interest rate rises, with many saying the cost of living was not getting any easier.

Among those feeling the pinch is single mum Sinead, 32, who moved out of her one-bedroom apartment at the Australia 108 tower in April after her weekly rent payments increased from $350 to $550, which was simply out of reach.

She said she tried to negotiate with the landlord so she could stay for three months to “at least give me some time to look for other places, and they said, ‘no’.”

Sinead, who asked for her surname not to be used, is now house sitting a two-bedroom apartment in Southbank while her friend is overseas until late May.

In the meantime, Sinead, who has a 20-month-old boy and works part-time, said she had been brought to tears looking for a home, but in a turn of luck, she had recently been given approval to move into a two-bedroom rental property in Ashburton after entering a ballot.

“It’s a government initiative so I believe what happens is now I have to provide proof of income and then they will show me the property and if I like it, I can move in,” she said.

Another resident Caitlin said she and her partner, who have two children aged three and 12 weeks, had been putting extra money into their mortgage but the latest interest rate rise meant “there’s not much buffer left”.

“We’re okay because we planned ahead years ago before we had kids, and we put money aside,” she said, but added “we are getting to the pointy point because we are on one income, and I don’t have a job to go back to.”

Resident Daniel Emerton and his partner moved out of their Southbank home after deciding not to pay an extra $100 a week for a one-bedroom apartment.

While they were lucky enough to secure a 12-month lease for a two-bedroom Southbank apartment in May, it came after attending multiple inspections which “were way too competitive”.

“There were so many people. It was just crazy,” Mr Emerton, who opened the Mr Summit Café with two business partners last year, said.

Southbank-based mortgage broker Jason Dullard said many homeowners had “felt the squeeze” since last year with more to be further impacted once they come off fixed-rate loans in the back half of the year. 

“The best thing you can do is contact your lender directly and ask for a discount and/or cashback to stay with them. If you aren’t happy with their offer, you should reach out to a mortgage broker to see if we can save you money,” he said.

“Given the 11 rate increases, as well as lenders increasing minimum cost of living in their serviceability calculators, most people’s borrowing capacity has dropped approximately 40 per cent (assuming no salary increases), so if you’ve purchased towards your maximum borrowing capacity in recent years, and your incomes haven’t increased, it’s unlikely you’ll be able to move lenders.”

Ray White Southbank sales manager Michael Pastrikos said the Southbank property market had demonstrated significant strength in 2022, resulting in prices recovering to near pre-COVID levels – with the rebound expected to continue into this year.

“Buyer motivation and sentiment in 2023 is favourable for sellers; buyers are no longer holding off because of rising interest rates. They have adjusted to the new norm and pricing in a buffer for any future rate hikes while being mindful of their lower borrowing capacity,” he said.

Mr Pastrikos said the rental market was still on the rise due to continuing migration from interstate and overseas, but stock levels had dropped as landlords were either moving back into their properties or selling their investments to owner-occupiers.  

“This is putting further pressure on the rental market and encouraging many tenants to enter the property market as buyers,” he said.

If you have plans on selling this year you might want to consider bringing those plans forward while supply levels are still down by approximately 15 per cent and buyer activity is high, this is an opportune time to be a seller in the market.

Australian Council of Trade Unions secretary Sally McManus said the latest interest rate rise in May was the wrong decision as “ordinary Australians are struggling to pay the bills every time they go to the supermarket, mortgages and rents have gone up an extraordinary amount as well”. •