- Banks and lenders have mostly passed on the cash rate rises in full
- Almost a fifth of mortgage holders were in shock when rate rises began to occur
- NAB is offering the lowest variable rate of the big four, at 4.24%
With the Reserve Bank of Australia (RBA) lifting the cash rate again this week for the sixth consecutive month, Mozo has found that 60% of households are under financial stress.
While the cash rate was 0.1% earlier this year, it has since risen to 2.60%, taking the average variable rate to well above 5%.
“In the last six months households have been hit hard. Rising interest rates have caused mortgages to increase by hundreds of dollars, making people rethink their financial decisions,” said Claire Frawley, Mozo Personal Finance Expert.
“Even though the RBA only increased the cash rate by 25 basis points, banks have been quick to announce that they will be passing it onto customers.”
The survey, which surveyed mortgage holders nationally, showed that 31% of borrowers are under some financial stress, but are able to pay their mortgage.
Although 18% were in shock when interest rates started to rise – after all, RBA Governor Philip Lowe and other commentators were adamant the cash rate wouldn’t rise until 2024 – they will be able to adjust to higher repayment amounts by the end of this year.
However, 14% have reported being under extreme financial stress, and unable to meet their repayments.
“Mozo found that more than three quarters (78%) of mortgage holders are concerned about rising interest rates. No matter your financial situation, rising interest rates are worrying for most households,” added Ms Frawley.
Around a third (32%) of homeowners said they would be under serious financial stress if their home loan interest rate was to reach 5% and 7%.
Lenders that have announced increases to variable home loan rates following the October RBA meeting (4/10)
The current average variable interest rate is 5.1% according to Mozo, but not all lenders have announced whether they will pass on the 25 basis points rise in full or not.
“Those with a variable interest rate of 5.26% will be paying $2,996 a month in repayments for a $500,000 loan.”
Currently, TicToc is offering the lowest variable interest rate on the database at 3.59%. NAB is offering the lowest variable rate across the big four banks at 4.24%.
“Before this rate decision, only 15 lenders had passed on all five rate increases in full to customers. All eyes will be watching to see how lenders react to this rate increase,” concluded Ms Frawley.
