Majority of Australian homeowners face mortgage stress

One in four is waiting on interest rates to drop before refinancing

Majority of Australian homeowners face mortgage stress

More than half of Australian homeowners are grappling with mortgage stress, with research commissioned by Aussie revealing that 52.5% of them are allocating over half of their income to mortgage payments, and 16% are struggling to meet repayments due to rising interest rates.

In response to these financial pressures, 40% of homeowners have increased their working hours or taken overtime, while 22% have secured a secondary job to manage the heightened mortgage costs.

Despite the current financial strain, over 25% are delaying refinancing in anticipation of a drop in interest rates.

Sebastian Watkins (pictured above), Lendi Group co-founder and Aussie chief operating officer, expressed concern over the financial burdens many are facing.

“This new Aussie data reflects the concerning financial stress faced by too many Australian homeowners as a knock-on effect from the interest rate increases,” Watkins said.

“The cash rate is at its highest point in over a decade, and our data confirms that households are significantly burdened by the increase in their mortgage repayments.

“This is forcing many Australians to alter their lifestyles dramatically, and despite this, over a quarter of homeowners are postponing refinancing in hopes of future interest rate reductions.

“We don’t know when the next interest rate drop will be, so in this uncertain environment Aussie is committed to implementing supportive measures and developing innovative solutions to help our homeowners manage these difficult economic times effectively.

“Brokers play a crucial role in this process, offering free guidance to homeowners. I strongly encourage anyone facing these challenges to reach out to a broker and explore the options available to them.”

The Aussie study also revealed that over 32% of homeowners have cut back on their savings contributions, with more than 18% ceasing to save altogether. Discretionary spending has also seen a decline, with over 37% abandoning personal care visits such as trips to the hair salon, 35% cancelling gym memberships, and nearly half reducing dining out expenses.

Homeowners aiming to upgrade or renovate their homes are similarly affected, with 21% delaying these plans until interest rates decrease.

“In this higher rate market, borrowers need to be actively pursuing all avenues to alleviate their mortgage stress right now – and not waiting on a potential drop in rates,” Watkins said.

“However, many lenders are offering rates from 5.99% to 6.4%, meaning an average homeowner with a $624,000 loan who refinanced right now, could save around $300 every month. These are significant savings which could make a key difference to the financial situation of many Australians, with new lender options available on the market to assist with this.”

How can brokers play their part to assist customers struggling to pay their mortgages? Comment below