Fixed-rate rollover continuing to drive up mortgage interest charges

Mortgage interest charges rose 2.7 per cent over the September quarter for employee households due to the continuation of fixed rates rolling over to higher variable-rate home loans, along with higher debt levels, the Australian Bureau of Statistics (ABS) has shown in its latest Selected Living Cost (SLC) index data.

While mortgage interest charges make up a higher proportion of expenditure of employee households, the rise in overall living costs was offset by large declines in electricity and fuel prices, increasing by 0.6 per cent over the September quarter 2024, down from the 1.3 per cent rise in the previous quarter.

According to the ABS, this marked the second consecutive quarter of slower growth in quarterly living costs.

As of the September quarter, the share of variable-rate home loans for owner-occupier loans rose to 83 per cent, while fixed-rate loans dropped to 17 per cent.

ABS head of prices statistics, Michelle Marquardt, said employee households have continued to experience higher living cost increases when compared to other household types due to the impact of higher mortgage interest charges.

“While the Reserve Bank of Australia’s cash rate remained unchanged this quarter, mortgage interest charges still rose due to the continued rollover of some expired fixed-rate mortgages to higher variable-rate mortgages and higher mortgage debt levels,” Marquardt said.

“Most Employee households did not qualify for previous electricity rebates, so the new rebates had a larger impact on their electricity bills.

“The fall in electricity prices for households receiving government payments was smaller because their bills were already reduced by the 2023–24 rebates. Electricity costs for Employee households fell by 20 per cent compared to households receiving government payments, which fell by around 10 per cent.”

On an annual basis, mortgage interest charges for employee households rose 18.9 per cent, far below the peak of 91.6 per cent seen in the June quarter 2023.

“This reflects only one rise in the Reserve Bank of Australia’s cash rate in the last 12 months, and a slowing in the rollover of expired fixed-rate mortgages to higher variable rate mortgages,” Marquardt said.

Meanwhile, living costs for the remaining household types rose by the smallest amount since 2020, up by between 0.3 per cent and 0.6 per cent during the quarter, and 3.5 per cent and 4.4 per cent annually (down from 3.7 per cent and 4.6 per cent).

Rent, food prices, and higher insurance premiums over the last 12 months contributed to higher annual living costs for all household types; however, this was once again offset by annual falls in electricity and fuel.

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Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.