By Brett Warren October 14, 2023

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Mortgage stress is a growing threat to Aussies – new data reveals

Property Investment
Mortgage stress is a growing threat to Aussies – new data reveals

Is your mortgage stressing you out?

Well, you're definitely not alone.

According to Finder’s Housing Market Report: Navigating Refinancing in 2023, with home loans at their most expensive in the last 11 years, Aussie mortgage payers have reached a breaking point.

In fact, data from the research unveils that 62% of those who are planning to refinance soon are stressed about their mortgage and that 1 in 2 are still financially stressed after they refinance their home loan.

Almost $15k added to the average yearly mortgage cost since April last year

According to the report, the 400-basis-point increase has added $14,688 to the annual cost of servicing a mortgage in Australia.

The last time the cash rate rose was in June, from 3.85% to 4.1%.

This marked its highest level since 2012.

Further, the average home loan being refinanced is worth $507,053 as of June 2023 – an increase of 28% in four years.

The latest Australian Bureau of Statistics (ABS) figures show the value of refinancing hit a record high in June with $22 billion worth of home loans refinanced in that one month alone.

Graham Cooke, head of consumer research at Finder, says:

“Rising borrowing costs are of great concern to a growing number of households.

Many have reached the end of their tether – spending a disproportionate part of their income on monthly repayments.

Refinancing your mortgage is a great way to improve your financial situation.

A reduction of even half a percent can be the difference of thousands of dollars a year which is better off in your pocket than as more profit for the banks.”

Rising costs are impacting the majority of mortgage holders

Data from the report also revealed that almost two-thirds (62%) of those who are planning to refinance soon are stressed about their mortgage.

Worryingly, 49% of homeowners said they were stressed about their mortgage even after they’d refinanced their loan.

When asked specifically if they struggled to pay their home loan, more than one-third of Australians (36%) said they did.

This figure has been increasing steadily from a survey low of 17% in October 2021.

The generation facing the most mortgage stress is Gen Y (millennials), with 64% of millennial borrowers looking to refinance because they’re struggling with the cost of living.

Cooke further said:

“Households are struggling to keep their heads above water and need relief urgently.

Millennials struggling the most out of all the generations is a concern because they are the generation that has bought most recently.

This could be a sign that they jumped in when rates were at record lows and were unprepared for an environment where rates and repayments increased.”

Overcoming the barriers to refinancing

Finder’s report found many Australian consumers lack the knowledge to refinance their home loans.

In fact, 1 in 5 respondents (18%) say they're not confident in their knowledge, while 63% have only slight confidence in their knowledge of refinancing.

On the other hand, just 19% say they are very confident.

As borrowers hunt for a better deal on their home loan, most are happy to cut ties with their existing lender.

The report also found that 2 in 3 future refinancers (64%) plan to lock in their loan with a different lender.

Cooked commenter further:

“It’s important that refinancers don’t feel rushed in making a decision.

There is a significant gap in rates offered by different lenders for comparable loan products.

Borrowers in difficult circumstances may be rushing to refinance without considering a wider range of loan options.

The best thing you can do is take the time to review and compare your home loan options to ensure you’re getting the most competitive rate.

It’s never too late to find a better home loan deal.”

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.