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Mortgage freedom revealed as top goal, hurdle for 2018

17 January 2018 Sasha Karen
Freedom, mortgage, goal, hurdle

New surveys show that more than one-quarter of Australians have paying off their mortgage as their financial priority in 2018 — which, interestingly, is also seen by most as their biggest hurdle.

Big goal

Results from a ME Bank survey of 1,500 Australians show that 26 per cent of respondents said that they plan to pay off a mortgage in 2018.

Following this, tied at second place, was building rainy day savings and saving for something other than a home, both at 23 per cent.

Paying debts registered fourth place at 21 per cent, building retirement wealth was fifth at 19 per cent, getting debt to manageable levels was sixth at 15 per cent, saving for a property eighth at 9 per cent and buying an investment property was 10th at 8 per cent.

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These results, according to ME Bank, also show a concern shared by borrowers that rates will rise in 2018, with 62 per cent expecting their lender to raise interest rates on their mortgage in the next 12 months.

With a hypothetical rise of 1 per cent, 56 per cent of borrowers said that it would adversely impact them, 43 per cent would spend less and 27 per cent of investors would sell their investment property.

ME said that the findings reflect a growing concern among borrowers that rates will increase in 2018.

The results also show that 29 per cent of borrowers are considering fixing to manage further rate rises, while 54 per cent look to picking the bottom of the market when fixing.

Matthew Read, a money expert at ME Bank, said that he sees rates rising this year, with repayments potentially rising “by $50 for every 25 basis point rise on a $400,000 loan”.

He said: “Banks will have already applied ‘stress tests’ to their customers, typically around 2 [to] 3 per cent above the advertised rate, when assessing loan applications, to ensure they can comfortably repay in higher rate environments.

“Borrowers can also help themselves by ramping up extra repayments, checking that their home loan rate is competitive and consider[ing] locking in a fixed rate loan.”

Big burden

In addition to paying off a home loan as a goal, the Mortgage Holder Sentiment Report 2017 by Gateway Credit Union has revealed that most Australians believe their mortgage is a burden.

From a total of 1,030 Australians that have or had a mortgage, this survey showed that 56 per cent believe their home loan is or was a burden, hampering their lifestyle.

This belief is gaining momentum, with 40 per cent of mortgage holders in 2017 viewing their home loan as at least somewhat beneficial, down from 45 per cent in 2015.

Looking at the states with the highest population, 59 per cent of Victorians see their home loan as a burden, followed by 56 per cent of New South Welshmen, while Queenslanders who see their home loan as a burden are in the minority at 47 per cent.

Paul Thomas, Gateway Credit Union’s CEO, said that this could be showing that the dream of owning a home is being tainted with the negativity of a home loan.

“We know Australians are heavily indebted. The latest figures from the Australian Bureau of Statistics (ABS) found that around three in 10 households (29 per cent) were classified as ‘over-indebted’. In fact, the ABS research also revealed owners with a mortgage were the most likely households to be over-indebted (47 per cent),” Mr Thomas said.

“It would seem Australians still want to achieve the dream of owning their own property, even at the expense of financial stress. As a result, their home loan becomes a pain point rather than an advantage.”

Mortgage freedom revealed as top goal, hurdle for 2018
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