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Rate wrecked: 1 in 5 homeowners now say they borrowed too much on their home loan

Homeowners struggling–GettyImages_1800x1000

Australian mortgagors are feeling like they've bitten off more than they can chew, according to new research by Finder.

A Finder survey of 310 mortgage holders revealed more than 1 in 5 homeowners (21%) admit they borrowed too much on their home loan – a worrying 693,000 households that have taken on too much mortgage debt.

As interest rates continue to climb, the number of households in financial distress is growing.

Finder analysis shows the average home loan rate has almost doubled – from 3.45% in April 2022 to 6.15% in November.

The average monthly repayment has grown nearly $1,000 from $2,231 to $3,128, based on a $500,000 home loan.

That's an annual increase from $26,772 to $37,536 in just 8 months, with further increases predicted.

Sarah Megginson, money expert at Finder, said those who didn't factor in rate rises could be feeling a lot of financial pressure now.

"Many Australians bought property during a record low interest rate environment and didn't plan for what they'd do if rates went up.

"Now as interest rates skyrocket, many have been pushed to their financial limit – with further rises on the way."

Younger property buyers were the hardest hit – with 1 in 4 generation Z buyers (25%) admitting they had borrowed too much.

Megginson said it's important to take control of the situation as soon as possible.

"Call your lender today and ask if there's any wiggle room. You'll be amazed to see what they can offer you to prevent you from moving to another lender.

"Also, consider refinancing to the cheapest rate in the market to lower your monthly repayments and to buy yourself some breathing room. The fees involved in refinancing are often more than offset by the savings you'll make.

"Let your lender know immediately if you don't think you'll be able to make a repayment. You might be able to take a mortgage repayment holiday or move temporarily to an interest-only loan.

"Downsizing is another trend we are seeing emerge as households look to decrease their expenses."

Queenslanders (26%) were the most likely to have regrets about how much they had borrowed, followed by borrowers from New South Wales (25%).

Men were more likely to say they were overcommitted – with 23% admitting they had borrowed too much on their home loan, compared to 19% of women.

Do you think you borrowed too much on your home loan?
Source: Finder survey of 310 mortgage holders, November 2022

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