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1 in 2 borrowers facing mortgage hardship

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Reporter 3 minute read

Almost half of borrowers are struggling to meet their home loan repayments, new research from Finder has revealed.

A survey of 828 mortgage holders, conducted by rate comparison website Finder.com.au, has revealed that approximately 48 per cent of borrowers are struggling to meet home loan repayments.

Of those struggling to meet repayments, 40 per cent said they are living month-to-month, 7 per cent said they are “barely able to make payments”, and 2 per cent said they are “behind on repayments”.

The research revealed that on a state-by-state basis, respondents from Western Australia faced the greatest difficulty meeting their mortgage repayments (55 per cent), followed by NSW (50 per cent), Victoria (49 per cent) and South Australia (41 per cent).

However, respondents from NSW were most likely to state that they are “barely able to make repayments” (9 per cent), followed by Victoria and Western Australia (7 per cent), and Queensland and South Australia (6 per cent).  

Additionally, 2 per cent of respondents from NSW, Queensland and Western Australia noted they were “behind on their repayments”, compared to 1 per cent of respondents from Victoria and South Australia.

Reflecting on the data, insights manager at Finder, Graham Cooke, noted the importance of securing a lower mortgage rate to ease the debt burden.

“Living month-to-month is a reality for millions of Australians, so if you’re in this situation, you are not alone,” he said.

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“Switching to a rate that is half a percentage point lower, like from 4 per cent to 3.5 per cent, could save the average Aussie more than $1,300 a year on their mortgage.

“Savings of any kind will be especially important if we are struck with the larger economic downturn that some are predicting.”

Mr Cooke also pointed to recent results from Finder’s RBA cash rate survey, in which 24 per cent of industry pundits and economists (6/25) said a recession in Australia in the next 12 months was “somewhat likely”.

“It’s best to hope for the best and prepare for the worst,” he added.

The Reserve Bank of Australia (RBA) has held off on cutting the official cash rate to stimulate the economy, despite concerns over weakening market conditions, particularly in the housing sector where dwelling values continue to fall.  

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However, almost half of respondents surveyed by Finder expect the RBA to cut the official cash rate before the end of August.

Speaking on a panel at NAB’s annual budget breakfast on Wednesday (3 April), Jonathan Pain, economist and author of The Pain Report, said he expects the RBA to cut the official cash rate four times in the next two years to a new record low of 0.5 per cent.

“I think the Reserve Bank is going to cut rates as soon as this election is out of the way. If we didn’t have this election in May, I think the Reserve Bank would have already been cutting rates,” Mr Pain said.

Mr Pain claimed that the RBA would decrease the cash rate by 1 percentage point (from 1.5 per cent to 0.5 per cent) because it is unlikely that the banks would pass on the entirety of their savings to their customers.

“I’m saying 1 per cent because the banks will arguably only pass on about 60 to 65 per cent of that,” Mr Pain said.

“Don’t forget, last time they didn’t pass it on for a range of reasons. Banks always want to protect their margins.”

NAB’s chief economist of markets, Ivan Colhoun, who was on the same panel, said he believes customers would be the beneficiaries of a reduced cash rate, noting that the “minor interest rate increases” seen last year was because “funding pressures moved against the banks”, forcing them to raise their rates.

“Those pressures have been coming off recently,” Mr Colhoun said, noting that this could change.

Meanwhile, NAB is anticipating two RBA cash rate cuts by the end of 2019 to 1 per cent – a view that was expressed by a number of industry pundits.

[Related: Pre-budget cash rate decision revealed]

1 in 2 borrowers facing mortgage hardship
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