Almost 70 per cent of mortgage holders have not stress tested their home loan in preparation for an interest rate hike, new research has revealed.
According to comparison website Comparethemarket.com.au’s Financial Consciousness Index, which involved a survey of 3,000 Australians nationwide in conjunction with Deloitte Access Economics, 68 per cent of mortgage holders have not stress tested their home loan.
“This is a particular worry when recent estimates show that a 0.5 per cent increase from current interest rates would cause mortgage stress to jump from one in four mortgaged households to one in three – a 2 per cent increase throws half of all mortgaged households into stress,” the report noted.
The survey also found that while 59 per cent of mortgage holders check for a lower interest rate, 41 per cent of surveyed respondents with a mortgage said they don’t check interest rate changes because they either ‘have no interest’, ‘don’t know what the [Reserve Bank of Australia] cash rate is’, or ‘do not see the relevance to them’.
When assessing the broader Australian population, the research found that over one-third of respondents said they never check the cash rate.
“This starts to get to the heart of a deeper issue – especially when you consider how snags in financial capability can result in significant public policy dilemmas and ultimately lead to broader economic issues – issues Australia may find that it faces in the coming decades,” the report read.
However, the Financial Consciousness Index, which assessed financial astuteness through the application of a score ranging from 0 to 100, found that mortgage holders are more financially conscious than respondents without a home loan, with a score of 56 compared to 44.
“The boost to financial consciousness that seems to come with home ownership typically stems from your understanding of interest rates and how rates impact your financial position.”
Moreover, the research also found that more than one in three Australians worry about losing their jobs, with 38 per cent feeling little job security, 33 per cent stating that they would have to rely on government benefits if they were out of work, and 39 per cent fearing changing workplace structures
Reflecting on the results, Rod Attrill, general manager of banking at Comparethemarket.com.au, said: “Although unemployment rates decreased to 5.3 per cent in August, the disruption of traditional workplace structures is clearly having an impact on the psyche of Australians.
“The fact that a third of us feel insecure about the future of our current position means not enough is being done to address this shifting structure.
“Job security is crucial to a person’s financial wellness and can therefore cause a lot of stress for people who worry about being out of work, especially without the savings or financial safety blanket to fall back on.”
Mr Attrill concluded: “With ballooning mortgages to pay, bills to worry about and ever-increasing grocery costs, our index revealed many Aussies just don’t have the savings to be without an income for more than three months, and some would resort to relying on government benefits.”