Home loan hell: Mortgage stress a growing threat to Australians
With home loans at their most expensive in the last 11 years, Aussie mortgage payers have reached breaking point, according to a new report by Finder.
Finder's Housing Market Report: Navigating Refinancing in 2023 – which combines lending data with a survey of 1,016 Australians who have recently refinanced or are planning to – has uncovered the extent of the financial stress caused by 12 cash rate increases in 17 months.
Below are some of the key findings from the report:
Almost $15K added to average yearly mortgage cost since April last year
- The 400-basis-point increase has added $14,688 to the annual cost of servicing a mortgage in Australia.
- The last time the cash rate rose was in June, from 3.85% to 4.1%. This marked its highest level since 2012.
- The average home loan being refinanced is worth $507,053 as of June 2023 – an increase of 28% in 4 years.
- The latest Australian Bureau of Statistics (ABS) figures show the value of refinancing hit a record high in June with $22 billion worth of home loans refinanced in that month alone.
Graham Cooke, head of consumer research at Finder, says:
- "Rising borrowing costs are of great concern to a growing number of households.
- "Many have reached the end of their tether – spending a disproportionate part of their income on monthly repayments.
- "Refinancing your mortgage is a great way to improve your financial situation.
- "A reduction of even half a percent can be the difference of thousands of dollars a year which is better off in your pocket than as more profit for the banks."
Rising costs are impacting the majority of mortgage holders
- Almost two-thirds (62%) of those who are planning to refinance soon are stressed about their mortgage.
- Worryingly, 49% of homeowners said they were stressed about their mortgage even after they'd refinanced their loan.
- When asked specifically if they struggled to pay their home loan, more than one-third of Australians (36%) said they do. This figure has been increasing steadily from a survey low of 17% in October 2021.
- The generation facing the most mortgage stress is gen Y (millennials), with 64% of millennial borrowers looking to refinance because they're struggling with the cost of living.
Graham Cooke, head of consumer research at Finder, says:
- "Households are struggling to keep their heads above water and need relief urgently.
- "Millennials struggling the most out of all the generations is a concern because they are the generation which has bought most recently.
- "This could be a sign that they jumped in when rates were at record lows and were unprepared for an environment where rates and repayments increased."
Overcoming the barriers to refinancing
- Finder's report found many Australian consumers lack the knowledge to refinance their home loans.
- 1 in 5 respondents (18%) say they're not confident in their knowledge, while 63% have only slight confidence in their knowledge of refinancing.
- Just 19% say they are very confident.
- As borrowers hunt for a better deal on their home loan, most are happy to cut ties with their existing lender.
- The report found 2 in 3 future refinancers (64%) plan to lock in their loan with a different lender.
Graham Cooke, head of consumer research at Finder, says:
- "It's important that refinancers don't feel rushed in making a decision.
- "There is a significant gap in rates offered by different lenders for comparable loan products.
- "Borrowers in difficult circumstances may be rushing to refinance without considering a wider range of loan options.
- "The best thing you can do is take the time to review and compare your home loan options to ensure you're getting the most competitive rate. It's never too late to find a better home loan deal."
Read the full Housing Market Report here.
