Three-quarters of borrowers unsure how rate hikes impact budgets

The research sought to understand how the increased interest rates are affecting Australia’s mortgage holders.

According to the survey of 1,010 mortgage holders – conducted on behalf of Aussie by YouGov between 8 and 13 July 2022 – three-quarters (75 per cent) of mortgagors are unsure how the increase to the official cash rate will impact their household budget.

Approximately 30 per cent (28 per cent) of borrowers said that they had not considered that the cash rate could increase when they were budgeting for a home loan (despite having to account for it in their home loan assessments).

Nearly two-fifths (38 per cent) had budgeted for it to rise up to 3 per cent, with around 14 per cent of mortgage holders saying they had revisited their mortgage finance as soon as the Reserve Bank first raised the cash rate in May of this year – the first time the cash rate had risen in nearly 12 years.

More than half (53 per cent) of borrowers who were on a fixed rate said they did not know what their revert rate was, while 20 per cent didn’t know when their fixed term expired. Of those that did, 58 per cent had not made any plans about it.

Concerns relating to mortgage defaults were also found to be generally high.

Two-thirds (65 per cent) of Australian home owners with mortgages said that they were concerned that they may default on their home loan payments as a result of the increased cash rate, with 30 per cent of borrowers saying they were “definitely or highly concerned” about defaulting on their home loan.

Younger borrowers and NSW borrowers – who generally have higher mortgages – were found to be most likely to feel concerned.

Indeed, around 18 per cent of respondents said that they were dealing with “significant mortgage stress”, while more than half (53 per cent) suggested they would be if the cash rate hits 3 per cent.

Speaking of the data, Karen Sorrenti, state broking manager at Aussie, commented: “With increased cost of living pressures, there’s no doubt this is a stressful time for many Australians, particularly mortgage holders…

“However, a staggering number of mortgage holders have not taken action or investigated their alternative options which is one key factor in addressing the mental and emotional strain.

“Over recent years, more Australians have understood the role that mortgage brokers play in helping navigate the home finance market, enabling them to secure finance that best suits their individual needs. 

“It’s never been more important for our network of more than 1,000 Aussie brokers to support homeowners to know their options and take action to help manage increasing costs of living and reduce anxiety.”

[Related: Broker expertise key for securing right loan: Mortgage Choice]