Mortgage breaking point: 100,000 borrowers one rise away from default
Key takeaways
- Up to two cash rate rises would push 9% of borrowers over the edge.
- 75% of experts from Finder's RBA Cash Rate Survey anticipate a hike tomorrow.
- 3% of mortgage holders say they they could only absorb one more increase before falling behind.
A significant number of Australian homeowners say they are dangerously close to falling behind on their mortgage, according to new research by Finder.
The Finder survey asked borrowers how many more interest rate rises they could withstand before defaulting on their home loan.
Almost 1 in 10 (9%) mortgage holders could no longer sustain the cost of their mortgage if they were faced with up to two rate rises. That's 297,000 mortgagors who admit they would default on their mortgage if they experienced one or two more rate rises.
Alarmingly, 3% (equivalent to 100,000 borrowers) say they are already on the brink, admitting they could only absorb one more increase before falling behind.
A further 9% of mortgage holders say three interest rate rises would push them over the edge.
This comes as 75% of experts from Finder's RBA Cash Rate Survey anticipate a hike to the cash rate in May.
Richard Whitten, money and home loans expert at Finder, said mortgage stress is escalating.
"Many Australians are walking a financial tightrope and it wouldn't take much to tip them over.
"This research reveals how little buffer many households have left.
"When you consider how persistently high the cost of living has been over many years, it's no surprise so many borrowers are nearing their limit again."
Whitten said a significant portion of households are already at breaking point.
"For a lot of borrowers, there's very little wiggle room left in the budget.
"Even one or two more rate rises could be enough to push some households into default.
Whitten urged homeowners feeling the pressure to act early rather than wait until they fall behind.
"Speak to your lender as soon as possible if you're struggling – there may be options available to help you stay on top of repayments.
"Refinancing or negotiating a cheaper rate could make a meaningful difference to your monthly costs."
Finder's research shows 37% of borrowers say four more hikes would be their limit.
At the other end of the spectrum, 22% believe they could withstand five more rate rises, while 23% say they could endure six or more.
Credits
- PR team: Taylor Blackburn, Kate Boddington, Natascha Kwiet-Evans, Jamie Hersch
- Insights research team: Graham Cooke, William Capada, Karen Manalaysay
- Survey operation: Qualtrics
Sources
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