Mortgage holders and support services have welcomed the Reserve Bank's decision to pause months of interest rate rises amid surging living costs, mortgage repayments, and more young people experiencing financial distress and accessing support services for the first time.
On Tuesday, the Reserve Bank of Australia paused interest rates after 10 consecutive rises at 3.6 per cent, with governor Philip Lowe noting the central bank is waiting to get a better idea of the impact past rate rises have on inflation and the economy.
It's a welcome reprieve for first time home owners Jeremy and Tayla Morris, who bought their Sunshine Coast home in September last year after taking out a variable loan, and only moved in at the end of March.
Since the couple bought their property, their mortgage has gone up by almost one percentage point, and has added $500 each month to their repayments since September.
"Being variable, we've felt the increases every month that the RBA has announced an increase, we felt it with our repayments, so it's been very noticeable," Ms Morris said.
Mr Morris said the RBA's decision to pause rate increases gave them some breathing space after six months of hikes.
"To add more on top of what we've already increased over the past six months would have been, not the be all and end all for us, but it would have been a negative and a bit of a sad way to to end our first couple of weeks in our home," he said.
"So it is nice to for it to be a positive and kind of something that we can celebrate."
But despite the initial excitement at the reprieve, he said the couple will take the central bank's warning of potential future hikes on board.
"It does put a little bit of fear back in your mind and I suppose you just have to make calculated decisions and maybe not go out and stretch yourself now just because there's a pause," Mr Morris said.
"So we'll monitor and everything and see how we go and kind of make a little bit of a plan for if they do continue to rise, and if they don't then that's a little bit of extra spending money."
A balancing act for landlords
The pause in interest rate rises is also welcome news for landlords, including David Rayment, who has two mortgages — one for his family home in Frankston, and another on an investment property in St Kilda.
He reduced his tenant's rent during the pandemic, but said he had little choice but to increase the rent now his loan repayments have doubled since the rate hike cycle began last May.
"I can remember when the cost for the interest was as low as $700 to $800 a month," he said.
"Now, the minimum just the interest that I'm seeing coming out is at least $1,300 or $1,400, and that's not the principal part on top that needs to be paid back."
Mr Rayment said the rent charged to his tenant had increased "between 10 and 20 per cent" in the past year.
"I think that's quite a substantial amount for a smaller unit, unfortunately, for my tenant, but it's an unfortunate reality for us," he said.
"I appreciate a landlord saying 'hey, I need to make more money' is never a nice thing to hear.
"But on the other hand, it is that, and we do have to pass on these increases, otherwise what's really going to happen is that if the property is passed on and sold, that may even then jeopardise my tenant's ability to live there if someone wants to move in."
Mr Rayment said he is reducing his own expenses where he can as costs increase, and tries to balance keeping rent increases affordable for his tenants while charging just enough to help him meet his repayments.
"The answer is trying to just have a moderate approach, not trying to charge too much, but at the same time trying to get by and be able to make those interest payments."
Lifeline, RBA to discuss impact of financial distress
The steep increases in interest rates have seen more people turning to services like Lifeline, which has reported an uptick in people accessing their financial distress and homelessness services for the first-time.
"We're seeing via web searches a significant increase in the number of people looking for support," said Dr Anna Brooks, Lifeline's chief research officer.
"We have people who are engaging with our digital services, and with our centres face to face, for the very first time.
"We're seeing a whole new cohort of people reaching out to Lifeline for support."
Dr Brooks said there were various groups reaching out for support, but younger families with mortgages made up "a large proportion" of new clients.
She said it was not uncommon for people to access Lifeline's services during times of financial distress, but said data from the Global Financial Crisis in 2008 showed there was an association between pressures on home owners, and an increase in deaths by suicide.
"There is precedent for this, sadly, and we're really seeing these current cost of living increases have had an impact on the Australian community right now," Dr Brooks said.
This increased demand for their services has prompted an unprecedented move, with RBA governor Philip Lowe sitting down with Lifeline for the first time next month to discuss the impact financial distress has on mental health.
"We're not economists, we don't presume to tell the RBA what their decisions should be, but what we are determined to do at Lifeline is to make sure that the relationship between financial hardship and risk of suicidality is one of the factors that's considered in making that decision," Dr Brooks said.
"Part of [Lifeline's] responsibility is making sure that we represent the evidence base around mental ill health and suicidality to policymakers as the context demands.
"We're very active in making sure that issues that relate to mental ill health and suicidality are front and centre in the decision making process for policymakers."
