The number of Australians defaulting on their home loan is on the rise, according to new research.
Finder has analysed APRA figures from earlier this year, which shows there’s been a seven per cent increase in the number of owner-occupier loans listed as “non-performing”, which means they are in default.
Finder Money Expert Rebecca Pike said in March $9.8 billion worth of outstanding loans hadn’t paid a repayment for 90 days or more, up from $9.1 billion in December 2022.
“After 12 interest rate rises in just over a year – millions of households are in survival mode,” she said.
“Add this to the rising cost of living with skyrocketing groceries and energy bills, and we’ve reached a point where people are having to make tough decisions in order to keep a roof over their heads.”
Finder figures show a staggering $15,000 has been added to the average annual mortgage in 14 months with the RBA raising the cash rate 12 times since April last year.
Their Consumer Sentiment Tracker reveals the average Australian household with a mortgage earns $116,222 and the average outstanding home loan size on owner-occupier mortgages is about $438,100, according to Finder analysis of APRA data.
“Many (homeowners) took out big loans when interest rates were at a record low and have now potentially over-stretched themselves,” Ms Pike said.
“While things feel like they can’t get much work for mortgage holders, a few more rate rises and the average Aussie will be in financial hardship.”
New Canstar figures show almost half of Australian mortgage holders have made changes to their home loan to cope with higher interest rates.
The survey of 669 Aussie mortgage holders found that of the 47 per cent of mortgage holders who had made changes to their home loans, 35 per cent had reduced extra repayments.
This was closely followed by stopping their extra repayments (29 per cent), tapping into redraw or offset funds to help with repayments (26 per cent), refinancing to a lower rate loan (22 per cent) and extending their loan term (12 per cent).
Other changes included switching to interest only repayments (10 per cent) and more drastic moves such as selling their home (7 per cent) or their investment property (4 per cent).
“It’s good to see that almost half of Aussie borrowers have planned for increased repayments by making changes to their loan,” Canstar Finance Expert Steve Mickenbecker says.
“Many borrowers have used the low interest era in recent years to prepare for higher rates by making extra repayments and now have money in their offset accounts or available for redraw.”
“Refinancing into a lower rate loan has got to be the least painful way to cope with higher interest rates.
“Borrowers can potentially save around half of the repayment increases that have come through in the last 12 months, halving the degree of difficulty.
“Borrowers who took out a loan in the lead up to the first Reserve Bank cash rate increase in May last year haven’t had time to build their defences for higher interest rates.
“Buyers at this time purchased when property prices were high and with their large loans, many will already be in mortgage stress and find the option to refinance is no longer open to them.
“This group may have to be tougher with themselves to find savings in their household budget or to supplement their income in some way in order to cover higher repayments.”
Ms Pike said Finder had a new Mortgage Stress Calculator to help Aussies make informed decisions about their finances so they can take steps to improve their financial situation.
“Based on the information you provide, the calculator will place users into one of five categories: in control, start saving, start cost cutting, in mortgage stress, or consider selling or moving,” she said.
“The calculator will also inform users of the maximum interest rate they can take on before they enter mortgage stress.
“Being in control of your finances and knowing your limits is key to a stable financial future.”
