May 30, 2022
A survey of 1000 Australians conducted by Mortgage Choice has found that the majority of Australian mortgage holders aren’t prepared for the rising interest rate environment.
Mortgage Choice National Sales Director David Zammit said, “After almost 12 years, the Reserve Bank of Australia raised the cash rate from the previous record low of 0.10% to 0.35% in May and has made it clear that there are further rate hikes to come.”
“Most lenders were quick to pass on the rate rise to borrowers. Fixed rates have been rising steadily for the past few months, and we will start to see these changes taking effect on variable rates. We asked survey respondents what home loan rate they were on and found that 55% did not know. In this environment, its important borrowers are informed so they’re not overpaying.”
“Given how complex the lending landscape is with hundreds of products in the market is near impossible for borrowers to know whether they have a ’good rate’ unless they use the expertise of a broker who has this information at their fingertips.”
“With the cost of living rising rapidly, Australians will be questioning how to lessen the burden on their hip pockets, getting a better deal on your home loan is a great place to start.”
“We asked survey respondents at what point would they become concerned about interest rate rises and found that 17% of borrowers would be concerned if home loan interest rates increased by just 1% and 48% would be concerned if rates rose by 2%. Given that interest rates are coming off all-time lows, a 2% rise for some borrowers is nearly a doubling of the interest that they are being charged each month. 1 in 2 respondents said they could afford to pay an extra $201 per month and only 33% of borrowers could afford to pay an additional $401 or more per month”
The Mortgage Choice survey also revealed that 31% of borrowers are losing sleep about interest rate rises. The survey revealed that those who have recently purchased their first home and Sydneysiders are the most concerned about rate rises, followed by those living in Melbourne, Adelaide and Perth. 18-35 year olds were the most concerned age group (89%), followed by 36-64 year olds (81%). First home buyers have never experienced a rising interest rate environment, and this new era will require them to be more proactive about who they engage to ensure their home loan remains the right loan for them.
Mr Zammit said, “If you’ve fixed your rate in the last couple of years and your fixed-term is coming to an end soon, you’ll need to decide whether you want to fix your rate again, or whether you’d rather choose a variable rate home loan. With so many options on the market, it’s important to have expert guidance. Especially given that in many cases the difference between a fixed rate and the variable rate can be 1% to 2%.”
“A mortgage broker can help borrowers feel like they’re not alone. 90% of survey respondents who used a broker said they were confident the broker had their best interest at heart, versus 74% of respondents who used a lender. Brokers can review your current home loan to see if their home loan remains the best option for them and, if it’s not, they can recommend a better deal to save you money,” said Mr Zammit.