28% of Mortgage Holders Can Absorb Interest Rate Hike; 26% Will Experience Mortgage Stress

With interest rates rising, many Australian mortgage holders are feeling the pinch
Published on June 20th, 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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   Commentary by 
Bill Tsouvalas

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Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Australian couple faced with rising interest rates, higher home loan repayments and mortgage stress

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Savvy's 2022 cost of living survey learns how interest rate hikes are affecting Australian mortgage holders.

  • 44% of Australian mortgage holders spend between $251-$500 in weekly repayments
  • 23% of mortgage holders spend $501-$750, and a further 18% spend $751 and over
  • 53% will cut down on other expenses to prioritise mortgage, 28% will absorb increase, 26% will experience mortgage stress
  • 38% of 25–34-year-olds and 35–44-year-olds identify mortgage repayments as a major cost of living stress

A nationally representative Survey conducted by Savvy has shown that 26% of respondents (n=1005) have cited mortgage repayments as a significant cost of living concern.

Extrapolated to the general adult population, this means 5.05 million Australians may be worried about keeping up with mortgage repayments in the coming months.

38% of 25–34-year-olds and 35–44-year-olds said that mortgage repayment increases are a significant concern when it comes to their ability to keep up with the cost of living. Other age groups expressed a lower level of concern about mortgage repayments; 25% of 18-24s, 32% of 45-54s, 18% of 55-64s and only 6% of those aged 65 and over.

According to the survey, 43.86% of mortgage holders spend between $251-$500 on repayments each week, while 23% spend between $501-$750. A further 18% claimed to pay $751 and over per week to cover their mortgage.

The survey identified 8.1 million (42% of n=1005) Australians as having a mortgage.

Mortgage Stress in Australia Infographic

Mortgage stress imminent

Mortgage stress as defined by the Australian Bureau of Statistics is a financial situation in which a homeowner or household is using more than 30% of their after-tax income to keep up with mortgage repayments. 

Research firm Roy Morgan considers homeowners “At Risk” of mortgage stress if they are spending between 25%-45% of their income on their mortgage; an “Extreme Risk” if they are expending 45% of their income on their home loan repayments. They estimated 584,000 mortgage holders were “at risk” at the end of 2021. 

A single person earning the average weekly wage ($1,813) would be at risk of mortgage stress if their weekly repayments exceeded $545.  

Bill Tsouvalas, Savvy Managing Director & personal finance expert;

“If that twenty-three percent who said they have mortgage repayments $500 to $750 per week were single income households, they would be in real trouble,” Bill Tsouvalas, CEO of Savvy says. “The COVID mortgage holidays are over and for some families, there may not be much left in the tank when it comes to covering mortgage repayments.”

When asked to choose their top three responses to mortgage repayment increases resulting from an interest rate rise, 53% of respondents said they would try to cut down on other expenditure to prioritise their mortgage. 28% of mortgage holders said they will absorb the increase, while 26% said they will simply grit their teeth and experience mortgage stress. 

20% said they’re prepared to change lenders or refinance; 13% will lock in a fixed rate with their current lender.

Responses of Australians to mortgage repayment increases - graph

Bill Tsouvalas, Savvy Managing Director & personal finance expert;

““If you can refinance at a lower rate – lock it in now,” Tsouvalas says. “Nought point eight five percent is still a record low; so get around to refinancing or fixing your rate as a first priority. Another option is to consider paying off all of your miscellaneous debts with a debt consolidation loan, to secure a more competitive and manageable interest rate. Once you have a handle on your other debts, it can make it easier to focus on your mortgage.”

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

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Australian couple faced with rising interest rates, higher home loan repayments and mortgage stress

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