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
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, Auto Talk, CleanTechnica, The Latch, Newcastle Herald, The Examiner, Illawarra Mercury, Professional Planner, New Idea, Canberra Times, Bendigo Advertiser, The Courier, Evee.com.au, MSN, The Australian, Stockhead, Yahoo Lifestyle, Smart Company, Yahoo Finance, Money Management, Proactive Investors, Glam Adelaide, Your Life Choices, Investor Daily, Real Estate Business, Homely.com.au, Money Mag, Yahoo News, Elite Agent, The West, Crikey.com.au, Yahoo Sports, AIB.edu.au, Domain.com.au, Nine.com.au, Mortgage Business, The New Daily, MPAMag, and NestEgg.com.au. In his spare time, Adrian enjoys mountain biking and business podcasts.
Our authors
, updated on February 27th, 2023       

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

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

Sources:

Savvy – 2022 Cost of Living Survey (n = 1005) 

https://www.abs.gov.au/census/guide-census-data/census-dictionary/2021/variables-topic/housing/mortgage-affordability-indicator-maid

https://www.roymorgan.com/findings/8843-mortgage-risk-during-covid-19-pandemic-september-2021-202111212305

https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/average-weekly-earnings-australia/latest-release

 

About Savvy

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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