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Time is running out for record low interest rates, but what are Aussies doing about it? Image: Canva.
  • Mortgage stress is defined as spending over 30% of your post-tax income on repayments
  • Very few Aussies intend to refinance or change lenders despite those moves being favourable
  • Interest rates were moved to 0.85% in June this year

Australia’s interest rates sat at 0.1% since November 2020 before moving to 0.35% in early May. Interest rates rose again in early June to 0.85%.

Significant sensationalism sent headlines haywire, but The Property Tribune noted last week:

“The increases of 0.35 and 0.50 percentage points by the Reserve Bank of Australia (RBA) in May and June appears to have been turned into something that it is not – because it is merely a sign of more normal monetary policy.”

Mortgage malaise manifests many?

So if rising interests should have been expected, and parents have attempted attenuating concern with, “but it was over 17% in the nineties”, what’s currently in the Australian psyche?

A survey conducted by Savvy identified 8.1 million Australians as having a mortgage.

The survey of 1005 people around the country found that just over one in four (26%) Australians will experience mortgage stress.

Savvy said that number extrapolated out to the general adult population means over 5 million Aussies are concerned about keeping up with mortgage payments.

Mortgage stress is defined by the Australian Bureau of Statistics as a situation where over 30% of after-tax income is spent on mortgage repayments.

When survey respondents chose their top three responses to a rate hike, 53% said they would cut back expenses, 28% said they would absorb the increase, and fewer took the options of refinancing and locking in a fixed rate; that’s despite the record low rates that are certainly not sticking around.

Multiple-choice response to survey question: If your mortgage repayments increase as a response to expected interest rises in 2022, how will this affect you?

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Source: Savvy 2022 Cost of Living Survey n=424 mortgage holders of 1005 total respondents.

How much are Aussies spending on mortgages?

The survey found 43.86% of mortgage holders spend between $251-$500 on repayments each week, while 23% spend between $501-$750. A further 18% claimed to pay $751 and over per week to cover their mortgage.

The number of people spending over $500 on their mortgages is a concern, said Savvy CEO Bill Tsouvalas:

“If that twenty-three percent who said they have mortgage repayments $500 to $750 per week were single-income households, they would be in real trouble. The Covid mortgage holidays are over and for some families, there may not be much left in the tank when it comes to covering mortgage repayments.

“If you can refinance on a lower rate – lock it in now. Nought point eight five percent is still a record low; so get around to refinancing or fixing your rate as a first priority,” added Mr Tsouvalas.

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Disclaimer: This article contains general information and should at no time be considered advice to the reader. The reader should always verify their situation with the relevant certified professionals before taking any further steps. 

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