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Another RBA rate hike to tip borrowers ‘over the edge’

Mortgage holders are being urged to hunt down lower interest rates, as a staggering amount say they won’t cope with another rate rise.

Image of Australian property and money. Home loan repayments and RBA interest rates concept.
A majority of mortgage holders say they won’t be OK if the RBA hikes interest rates again. (Source: Getty)

More than two-thirds of Aussie mortgage holders wouldn’t be able to cope if interest rates were to rise again.

The Reserve Bank (RBA) kept the cash rate steady yesterday, but many borrowers are still feeling the pain from the central bank's 12 previous cash rate hikes.

The average borrower with a $500,000 loan is now paying an extra $1,217 in monthly repayments, since the rate-hiking cycle began in May 2022.

Worryingly, the Canstar research found just 31 per cent of borrowers were confident they could continue to make their loan repayments if interest rates were to rise again. About 8 per cent said they were already behind or struggling with their loan repayments.

Canstar finance expert Steve Mickenbecker said the findings were “good cause for community-wide concern”.

“Many borrowers feel they are on a cliff and will nervously await the Reserve Bank’s November cash rate decision, fearing that another rate rise will tip them over the edge,” Mickenbecker said.

“If the September-quarter inflation figure - due to be released in late October - shows a lack of progress towards 3 per cent, the Reserve Bank may be left with little option but to increase the cash rate.”

It comes as a record 1.57 million Aussies are deemed “at risk” of mortgage stress, which equates to 30.2 per cent of all borrowers.

The number of borrowers considered “extremely at risk” has now increased to more than 1.07 million, or a fifth of borrowers, Roy Morgan found.

Refinance and save

Mickenbecker urged mortgage holders to see if they could refinance to a lower rate, with the potential savings “too big to ignore”.

“Borrowers who are already stressed are likely to find themselves excluded from refinancing into a lower interest rate loan because of the higher risk their loan now presents,” Mickenbecker said.

“For other borrowers who are still in good shape, refinancing is the first line of defence for interest rate increases, and we are seeing record levels of borrowers switching lenders.”

The average existing borrower has an interest rate of 6.98 per cent. By refinancing to the lowest Canstar 5-Star-rated variable-rate loan of 5.54 per cent, a borrower with a $500,00 loan could save $468 a month and more than $168,000 in interest over the life of the loan.

For borrowers already in mortgage stress, Mickenbecker said tracking your household budget was a must, including insurance, phone, internet, loans, power and everyday spending.

“There are short-term measures that can be undertaken with the help of the lender, like extending the term of the loan, moving to an interest-only period or a repayment holiday,” Mickenbecker said.

“However, it is important that borrowers talk to their lender and consider getting advice from the government’s National Debt Helpline. Measures should be treated as short term and borrowers should aim to reverse them voluntarily when they are back on their feet.”

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