The big banks are set to repeatedly hike mortgage interest rates, potentially putting marginal borrowers in a world of hurt, an international investment expert warns.
"Australian homeowners and retail investors should prepare for higher mortgage rates and slower house price growth," Oreana Portfolio Advisory Services global chief investment officer Isaac Poole said in a new update report.
"We have a high conviction view that standard variable mortgage rates will move higher.
"This could be as high as 100 basis points (1 percentage point) over the coming 24 months."
Burnie-based Dr Poole said that would be challenging for home owners around Australia, especially in regional areas.
"The risks are that mortgage rates move higher even faster than we anticipate," he said
Dr Poole said household indebtedness had increased and a sharp increase in mortgage rates could be a considerable challenge to marginal household borrowers.
"The downside risk is that a rise in defaults or non-performing loans results in tightening credit standards, reduced credit availability and a correction in house prices," he said.
Dr Poole said Oreana did not expect rates to move lower.
"That means individuals should think carefully about their mortgage structure," he said.
"Fixing rates for a longer period may be an option for those looking at fixing loans.
"Importantly, we do not expect to see house prices decline over the near to medium term."
Dr Poole said residential property in growth areas had hit new peaks and price increases were starting to spread "beyond the growth areas out to the suburbs".
He said Australian house prices had increased by almost 7.5 per cent in 2021 and there was still some upside potential for prices.
The rates hikes he envisaged would be independent of the Reserve Bank.
The Reserve does not expect to increase the official cash rate any time soon.
"It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range," Reserve Bank governor Philip Lowe said on June 1.
"For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently.
"This is unlikely to be until 2024 at the earliest."
Sign up for our newsletter to stay up to date.