Rising tension: Home loan rate rise would put 1 in 20 Aussies in strife
A significant number of Australian households would be pushed into financial hardship if their home loan rate increased out of cycle, according to new research by Finder.
A nationally representative survey of 597 Australians with a home loan revealed 1 in 20 (5%) would require financial assistance if their home loan rate went up.
More than half of borrowers (53%) – equivalent to 1.5 million people – would try to negotiate a lower rate with their current lender if they were hit with an out-of-cycle rate rise.
Sarah Megginson, Finder home loans expert, said thousands of Australians had been left "debt vulnerable" by the pandemic.
"Over the past 18 months, so many Aussies have seen their financial reserves drained.
"There's a real chance that further economic shock could lead to more people falling behind on their mortgage payments."
The survey found 1 in 4 (25%) would refinance to another lender – that's 725,000 home owners with a mortgage who would consider switching lenders if their interest rate went up.
Around 1 in 5 (18%) would do nothing.
Regardless of whether or not interest rates increase, Megginson urged Aussies to shop around for a cheaper mortgage to improve their cash flow.
"Mortgage holders have to make hay while the sun shines. With rates at all-time lows and a rising number of cashback offers, conditions couldn't be much better to save money on your home loan," she said.
"If you have an older home loan, there's a good chance you're paying more than you need to.
"Competition in the market is fierce so get on the phone and negotiate. Ask for a better deal – odds are, the rate your bank is offering new customers is lower than what you're paying.
"If they won't give you a better rate, take a walk to another lender and get a better deal. It's easier than you think and you can save thousands of dollars a year."
|What would you do if your current home loan interest increased out of cycle?
|I would try to negotiate a lower rate with my current lender
|I would refinance to another lender
|I would be pushed into financial hardship and require assistance
|Source: Finder survey of 597 home loan owners, July 2021
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