Rapidly rising mortgage rates could leave borrowers in serious financial trouble, with new research finding two-thirds of homeowners may default as a result of the increased cash rate.
With the Reserve Bank of Australia hiking the official cash rate to 2.35 per cent this week, many borrowers have been blindsided by the fastest series of increases in history.
According to Aussie, 30 per cent of borrowers were expected to go into ‘significant mortgage stress’ if the cash rate climbed to 2 per cent, while 42 per cent would be under pressure if it reaches 2.5 per cent and 53 per cent would if it hits 3 per cent.
Aussie State Broking Manager, Karen Sorrenti said thousands of Australians were concerned about rising interest rates.
“With increased cost of living pressures, there’s no doubt this is a stressful time for many Australians, particularly mortgage holders,” Ms Sorrenti said.
“Our latest research shows almost one in five Australians (18 per cent) with mortgages are dealing with ‘significant mortgage stress’, and a further four in five (81 per cent) confirmed the rising cash rate and upward cost of living is a growing reality, placing unwanted tension on their household.”
The research revealed three in four (75 per cent) Australian mortgage holders are unsure how the RBA cash rate increase would impact their household budget.
Worryingly, almost three in 10 Australian mortgage holders (28 per cent) did not consider that the cash rate would increase at all when budgeting for a home loan, despite having to account for it in their home loan assessments, while another four in 10 (38 per cent) only budgeted for the impact of a cash rate of 3 per cent or under.
The research also noted younger mortgage holders under 50 were more likely than those over 50 to feel concerned at some level (74 per cent of those aged 18-34 and 71 per cent of those aged 35-49, compared to 53 per cent of 50+).
With the highest home prices in the country, understandably 38 per cent of New South Wales homeowners feel concerned about higher interest costs, compared to those in Victoria (27 per cent), Queensland (24 per cent) and South Australia (23 per cent).
Financial wellbeing expert and Author of The Billionaire Buddah, Jane-Monica Jones said there are options out there for those who are nervous about managing their mortgage repayments.
“There are also many more ways to manage household stress through setting financial boundaries and managing financial wellbeing,” Ms Jones said.
“I’d encourage anyone concerned with mortgage related stress to work on their financial literacy, reach out to experts to learn more about what options are available to support their individual circumstances and be proactive to improve their financial well being and resiliency.”