Around one in five Aussie mortgage holders borrowed too much money on their home loan, according to a new survey, with a worrying 693,000 households having taken on too much mortgage debt.
As interest rates continue to climb, the number of households in financial distress is growing. A Finder survey of 310 mortgage holders found the average home loan rate had almost doubled – from 3.45 per cent in April 2022 to 6.15 per cent 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 eight months, with further increases predicted.
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Finder money expert Sarah Megginson 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,” Megginson said.
“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 one in four Gen Z buyers (25 per cent) admitting they had borrowed too much.
Megginson said it was 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,” she said.
“Also, consider refinancing to the cheapest rate in the market, to lower your monthly repayments and buy yourself some breathing room. The fees involved in refinancing are often more than offset by the savings you’ll make.”
Megginson said it was important to let your lender know immediately if you didn’t think you’d be able to make a repayment.
“You might be able to take a mortgage-repayment holiday, or move temporarily to an interest-only loan,” she said.
“Downsizing is another trend we are seeing emerge as households look to decrease their expenses.”