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Mortgage Cliff

Mortgage Cliff


Here’s a quick quiz to see whether you’ve been paying attention lately.

Question one: How many times have predictions of things like property prices falling off a cliff appeared in media headlines in the past, say, three years?

Question two: How many times have things actually gone ahead and fallen off the forecast cliff?

Question three: Should we be listening any more to journalists and economists who predict these dire cliff disasters?

So, how did you go with the quiz?

I don’t have the exact number of headlines which have forecast a mortgage cliff or a market cliff or prices falling off a cliff, but it would number in the thousands so far in this decade of the 2020s.

Now, as to how many times things have actually fallen off the alleged cliff, I do have a precise answer: exactly zero times.

We were told property prices would fall off a cliff in 2020 but they rose.

We were told at the start of 2023 that prices would collapse and drop of the proverbial cliff but, again, prices have been rising.

But the big cliff, the one media has really obsessed over, is the mortgage cliff.

We were told to expect one during the Covid lockdowns because people couldn’t go to work or into their businesses and earn money to pay mortgages, but lenders adapted to the situation and that mortgage cliff failed to materialise.

And this year we had another mortgage cliff to confront. This was the one caused by people on fixed-rate mortgages coming to the end of the fixed period and suddenly facing much higher repayments with higher variable interest rates.

This was forecast to be the grandaddy of all mortgage cliffs and provided fodder for countless clickbait headlines this year.

But here’s the thing: it hasn’t happened.

We’re in the middle of company reporting season, with the major lenders, the big banks, reporting their annual profit results – and they all say the transition of customers from fixed rate to variable rate mortgages is happening in an orderly fashion with few problems.

National Australia Bank boss Ross McEwan says there has been what he terms a “modest deterioration” in the quality of the bank’s loans but no major problems. 

McEwan said: 

“We know this environment is challenging for our customers, but pleasingly, most are proving resilient with only a modest deterioration in asset quality.”

Commonwealth Bank, which has tens of billions in mortgages transitioning off fixed rates, says arrears for loans rolling on to variable rates are in line with its broader portfolio. 

Thirty-day arrears were just 0.92% of loans and 90-day delinquencies were only 0.43% of the total.

So, yes, news media has got it horribly wrong again.

And here’s the other thing: media will never apologise for getting it wrong or even acknowledge they made a major mistake.

They SHOULD apologise because headlines and soundbites like these cause fear and anxiety in the community.

We live in times of a global pandemic, high inflation, massive economic disruption, war in Europe and daily stories of climate-related disasters.

People don’t really need any more grief in their daily diet of news headlines, but journalists love to pile on.

You have to wonder about the mindset and the business model they’re using.

Most businesses have the approach that if they make their customers feel happy or satisfied, they will make money.

Media has a different model. They believe they can make money if they make their customers feel distressed, anxious or fearful.

Hence the constant barrage of negative headlines forecasting disasters of various kinds.

But most of the predicted catastrophes, like the mortgage cliff, have failed to happen.


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