145,000 homeowners would consider selling if rates rise

More than 500,000 Australian homeowners would struggle to pay their mortgage, with many forced to sell, if interest rates rise three per cent according to a new survey.

A new Finder survey revealed 19 per cent of homeowners – equivalent to 551,000 people – would struggle to meet their repayments if their home loan interest rate increased 300 basis points.

Five per cent (equivalent to 145,000) of homeowners said they would struggle so much they would consider selling their home.

Home loans expert at Finder, Richard Whitten said some households were in a dire position as they struggled to cope with the worst cost of living crisis seen in years.

“After yet another cash rate increase, mortgage repayments for many borrowers are higher than they were a few months ago and likely to climb higher still this year,” Mr Whitten said.

“Through the rest of 2022, many homeowners on variable rates will start to struggle more and we will likely see the number of defaults rise.

“Those on fixed rates may not notice a difference now, but they’ll get a real shock once that rate stops and they are looking at a fixed-rate cliff.”

The survey found nearly half of homeowners (48 per cent) would be able to handle a three per cent hike to their home loan, however, they would have to cut their spending.

Only 25 per cent said a rate rise would not change their lifestyle or spending habits.

Mr Whitten said selling a home because you can’t afford the mortgage was an extreme measure and should be a last option.

“The first thing you can and should do is compare your home loan against others in the market,” he said.

“Even if you can shave just 0.5 per cent off your rate, it’s worth switching.”

“Now is also a good time to look at your other expenses and figure out where you could be saving.”

Mr Whitten said creating a budget can limit overspending on non-essentials such as food delivery or online shopping.

“If you’ve scraped every last bit of savings and you’re still struggling, it’s time to call your lender,” he said.

“They may be able to help get you onto a repayment plan that means you can afford to put food on the table.”

Additional rate rises would also disproportionately affect female homeowners, according to the survey.

Female homeowners (8 per cent) are more likely than their male counterparts (3 per cent) to say they would seriously struggle with a rate rise and consider selling their home.

On the other hand, 33 per cent of male homeowners would manage well without any lifestyle changes, compared to just 13 per cent of female owners.

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.