Mortgage anxiety is hitting Australian households, with new research revealing 86% of homeowners have not acted since the first cash rate hike.
With five consecutive basis point increases to the official cash rate, Aussie Home Loans says many mortgage holders are waiting, watching and hurtling towards mortgage anxiety with 30% admitting they are avoiding a default on their home loan.
Aussie conducted the research to understand how the increased interest rate rises are affecting Australian mortgage holders and what they could do to help them.
The study revealed 75% of mortgage holders are unsure how the RBA cash rate increases impact their household budget, while 28% were not considering the cash rate would increase at all when budgeting for a home loan, despite having to account for it under their home loan assessments.
“With increased cost-of-living pressures, there’s no doubt this is a stressful time for many Australians, particularly mortgage holders,” said Aussie state broking manager Karen Sorrenti (pictured above left). “Our latest research shows 18% with mortgages are dealing with ‘significant mortgage stress’ and a further 81% confirmed the rising cash rate and upward cost of living is a growing reality, placing unwanted tension on their household.”
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Sorrenti said a staggering number of mortgage holders had not acted or investigated their alternative options, which was a key factor in addressing the mental and emotional strain.
“Complementing the prime opportunity to look at refinancing for a lower rate, there are also many more ways to manage household stress,” she said. “There are options which include setting financial boundaries and managing financial wellbeing.”
Sorrenti said more Australians understood the role that mortgage brokers play in recent years by helping navigate the home finance market.
“Brokers enable people to secure finance that best suits their individual needs,” she said. “It’s never been more important for our network of more than 1,000 Aussie brokers to support homeowners to know their options and take action to help manage increasing costs of living and reduce anxiety.”
Read more: There will be at least two more rate rises
Financial therapist and financial wellbeing expert Jane-Monica Jones (pictured above right), said she encouraged 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,” Jones said. “Aussie research indicates only 14% of mortgage holders have been on the front foot revisiting their home loans as soon as the first cash rate rise happened in May this year.”
Sorrenti has revealed seven savvy ways to avoid mortgage stress:
● Stop, look and ask; always know what your current rate is and if it’s fixed, ensure you know when it ends
● If you’ve avoided financial literacy, now is the time – it’s the gateway to managing or better avoiding financial distress
● Do some calculations – be one step ahead on what you can afford for repayments and what amount would put you on the path to financial strain
● Practice a mindful money approach, paying attention to your full financial position
● Refinance to a home loan with low or zero fees
● Take advantage of refinance cashback offers
● Consider an offset account to reduce the amount you pay in home loan interest