Is Airbnb Australia's 'Fixed Rate Cliff' Saviour?
In addition to ten consecutive cash rate rises, cost-of-living pressures, the rising cost of housing and increasing rental prices, a fixed rate cliff is looming. The Reserve Bank of Australia estimates over 800,000 Australians are due to roll off their fixed rate mortgage this year.
According to Anna Porter, Suburbanite Principal, market commentator and valuer, for many, this will result in their mortgage repayments doubling or even tripling.
"The current environment is the worst possible mix for those locked into a fixed rate approaching its end of life," says Porter.
"Whilst the banks typically assess borrowing at a higher rate, the current interest rates are at 11-year highs, so we expect to see a real squeeze on the budget as these fixed rates wear off."
Porter believes there is a lifeline – Airbnb.
"Households struggling with new repayments are turning to Airbnb to boost their income. They are simply moving back in with family so they can switch their home to an Airbnb full time, or some are doing it part-time," shares Porter.
"Savvy part-time Airbnb users simply do mini-stays with family and friends or go away camping to free up peak times and maximise their revenue."
Depending on location and the time of year, homes can attract hundreds and even thousands of dollars a night, providing a nice retreat from mortgage repayments.
"In the permanent rental market, you will typically get 3% net returns, but rates are close to double this, so the return doesn't even make a dent in the repayments," she says.
"Airbnb can achieve much higher returns for the right property and the right location, helping some people cover their whole repayments."
If Airbnb is not an option for you, Anna says you need to be upfront with your bank – don't ignore the problem, as it will only get you in deeper.
"You may be able to get a payment holiday under financial hardship if things get really tough," says Anna.
"Now is also the time to get your accountant involved to do a crisis cash flow management plan which could be key to staying afloat."
