RBA’s bleak admission as interest rates force homeowners to sell:

The Reserve Bank of Australia (RBA) has admitted some under-pressure mortgage holders will be forced to sell their homes to keep afloat. Governor Michele Bullock delivered the crushing blow that interest rate cuts were not being considered after the economy grew a tepid 0.2 per cent in the June quarter.

Almost half of all mortgage holders (42 per cent) struggled to pay their home loan in August, according to “disturbing” research released by Finder on Thursday.

Bullock said she understood many people were struggling, with about five per cent of people with a variable-rate mortgage already facing a “cash flow shortfall” were their spending and repayments were more than their income.

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She said the “fairly small” group – predominantly made up of young people and low-income earners – would have to make “quite painful adjustments” to avoid falling behind on their mortgages.

“This includes things like cutting back on their spending to the more essential items, trading down to lower quality goods and services, dipping into their savings or working extra hours,” Bullock said.

“Some may ultimately make the difficult decision to sell their homes.”

Are you struggling to afford your basic costs? Contact tamika.seeto@yahooinc.com

A recent poll of more than 7,300 Yahoo Finance readers revealed more than two-thirds of respondents (70 per cent) were allocating 35 per cent or more of their income to their mortgage. A little more than half were spending more than 40 per cent

Mortgage stress is when you are paying more than 30 per cent of your take-home pay toward your home loan.

In her speech, Bullock said the board was looking to strike “an appropriate balance” between the RBA’s inflation and full employment objectives.

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The consequences of not getting on top of inflation were far more dire, she warned.

“Ultimately, we would need to slow the economy down by more, which would result in a larger rise in unemployment and higher risk of recession,” she said.

“There is a reason why there is so much talk about the cost of living – high inflation hurts everyone, and especially the most vulnerable.”

Mortgage stress at a high

Finder’s research found mortgage stress was at the highest level since 2019 as home loan repayments continue to eat up more and more of Aussies’ household income.

It comes as owner-occupiers take out bigger loans with the average mortgage sitting at $634,479, up 1.3 per cent from July and up 9.3 per cent from the previous year.

Finder home loans expert Richard Whitten said many Aussies were spending a disproportionate amount of their wages on their repayments.

“Million of mortgage holders have managed rate hikes so far, but now they’re facing severe financial strain as their savings and emergency funds dry up,” he said.

“Housing is increasingly becoming a major source of stress for Australians, with…