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New research reveals that a substantial percentage of Australian mortgage holders are unprepared to manage their home loans in the face of rising interest rates.
Nearly one in five (17 per cent) of mortgage holders admit to having little or no understanding of how the Reserve Bank of Australia (RBA) cash rate increases will affect their household budget, while 23 per cent have a basic understanding but are uncertain about the specifics in relation to their own household budget.
The research, from financial services group Aussie, was conducted to understand how increased interest rates are affecting Australia’s mortgage holders and what they could do to assist them.
It found that many of those who are unsure of how the RBA cash rate increase will affect their household budget are displaying higher levels of stress.
With 65 per cent of those surveyed stating that they hold some level of concern that they could default on their loan due to cash rate increases, that figure blows out to 74 per cent for the youngest group surveyed: 18- to 34-year-olds.
Stress levels were also elevated among 35- to 49-year-olds, with 71 per cent of this cohort reporting concern. For those over 50 years old, just over half expressed the same (53 per cent).
Uncomfortably, nearly three in 10 Australian mortgage holders (28 per cent) did not account for a cash rate increase when budgeting for a home loan, despite being required to do so in their home loan assessments, while nearly four in 10 (38 per cent) only accounted for the impact of a cash rate of 3 per cent or less.
Home owners in NSW (38 per cent) are more likely than those in Victoria (27 per cent), Queensland (24 per cent), and South Australia (23 per cent) to feel very concerned.
Karen Sorrenti, state broking manager at Aussie, said it’s never been more important for Australian home owners “to know their options and take action to help manage increasing costs of living and reduce anxiety”.
Weighing in, financial therapist Jane Monica-Jones said she would “encourage anyone concerned with mortgage related stress to work on their financial literacy, reach out to experts to learn more about what options are available to support their individual circumstances and be proactive to improve their financial wellbeing and resilience”.
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