Feeling the Pinch: 25.7% of Australian Mortgage Holders Have Seen Repayments Rise by Over 6%

How are Australians with home loans dealing with interest rate rises?
Last updated on August 5th, 2022
  Written by 
Adrian Edlington
Adrian Edlington is PR & Communications Manager at Savvy. With a keen interest in personal finance, car loans, the mortgage industry, cost of living pressures, electric vehicles and renewable technology, Adrian's research includes conducting primary data surveys and analysis of up-to-the-minute secondary Australian data sources. His work on behalf of Savvy has been featured on ABC.net.au The Conversation, the Sydney Morning Herald, AFR, News.com.au, The Age, Herald Sun, Adelaide Now, SBS On The Money, 7News, Car Expert, Which Car, Drive.com.au and more. In his spare time, Adrian enjoys mountain biking and business podcasts.
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Stressed couple looking at increased mortgage repayment bills

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Savvy's survey investigates the impact of interest rate rises on mortgage holders to learn how much repayments have risen and how Australians plan to cope with the increase. 

  • 52% of Australian mortgage holders have had repayments rise up to 5%
  • 18.1% of mortgage holders have seen repayments rise from 6-10%
  • 6.26% of mortgage holders have seen repayments rise from 11-20%
  • 1.34% of mortgage holders have had repayments rise by 21% and over
  • 60% of mortgage holders will “spend less” to prioritise mortgage if rates rise
Stressed couple looking at increased mortgage repayment bills

A recent survey conducted by Savvy on the cost of living (n=1,003) showed that 77% of mortgage holders (n=447) have experienced some form of rate rise, with 25.7% of those seeing their repayments rise above 5% in a worrying trend of inflation impacting the cost of living.

18.1% of mortgage holders have experienced repayment rises from 6-10%. 6.26% have had to deal with a rise of 11%-20%; 1.34% have reported increases in excess of 21%.

As for corresponding pay increases, 34% of all Australians surveyed said their pay has not changed since 2021. 26% report a pay rise of up to 5%, and 7% say it’s gone up between 6-10%.

How mortgage repayments have changed since increase in interest rates - Graph

Rate Rises and Inflation: Working as Intended?

60.6% of mortgage holders said they would “spend less” on consumer and other goods and reprioritise the mortgage if rates rise, the survey has revealed.

Interest rate rises, according to economic theory, are a curb on inflation. As the money supply gets tighter and borrowing costs rise, it naturally discourages the purchase of risky assets and eventually, consumer and business spending. 

Graph - Australian mortgage holders' response to rate increases

Bill Tsouvalas, Savvy Managing Director;

“The survey results presented here show economics in action – a rise in interest rates means a corresponding downward trend in overall spending,” says Bill Tsouvalas, CEO of Savvy and economics spokesperson. “But that is of little comfort to Australians already doing it tough and set to do it tougher as the RBA puts the brakes on a little more each month.”

“Only twenty-six percent of mortgage holders in our survey said they’d try and fix their current home loan rate. This should be one hundred percent. If you are on a mortgage, the time to lock in a fixed rate or consider refinancing is now. The time to lock in a low fixed rate is now. Don’t put it off. This should be your first priority.”

32% of homeowners said they would rely on savings to fund the increase; the same proportion would try to increase their income.

The RBA increased the official cash rate by 50 basis points to 1.85%p.a. at their 2nd August board meeting. The current inflation rate is 6.1%, up 1% from last quarter.

If you are experiencing acute mental stress due to finances, contact Beyond Blue on 1300 22 4636 or Lifeline on 131 114.

For more information, contact Adrian Edlington – [email protected]

Sources:

Savvy – 2022 Cost of Living Survey – 2 (n = 1003) 

https://www.investopedia.com/ask/answers/12/inflation-interest-rate-relationship.asp

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Savvy is one of Australia’s largest online financial brokers, focusing on personal and commercial financial products. Founded in 2010, the firm has seen rapid growth, a testament to their provision of market leading rates and reaching customers with the latest in media and technology. Savvy is a proud supporter of Kids Under Cover, a charity assisting homeless and at-risk youth to strengthen their bonds to community and education. Savvy was named one of BRW’s fastest growing companies in 2015.

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