On the brink: 145,000 homeowners would consider selling if rates rise
As homeowners grapple with 4 consecutive cash rate rises, many may be forced to sell their homes, according to startling new research from Finder.
A new Finder survey of Australian homeowners revealed 1 in 5 (19%) – equivalent to just over half a million (551,000) people – would struggle if their home loan interest rate were to increase by 3 percentage points.
This includes 14% who say they might fall behind on their repayments or other bills.
A concerning 5% would struggle so much so they would consider selling their home – equivalent to 145,000 homeowners.
Richard Whitten, home loans expert at Finder, said some households are in a dire position as they struggle to cope with the worst cost of living crisis we've seen in years.
"After yet another cash rate increase, mortgage repayments for many borrowers are higher than they were a few months ago and likely to climb higher still this year.
"Through the rest of 2022, many homeowners on variable rates will start to struggle more and we will likely see the number of defaults rise.
"Those on fixed rates may not notice a difference now, but they'll get a real shock once that rate stops and they are looking at a fixed-rate cliff."
The research found almost 1 in 2 (48%) would be able to manage a hike of 3 percentage points to their home loan, but they would have to cut down on their spending.
Only 25% say a rate rise would not change their lifestyle or spending habits at all.
Whitten said selling your home because you can't afford your mortgage is an extreme measure and should be your last option.
"The first thing you can and should do is compare your home loan against others in the market. Even if you can shave just 0.5 percentage points off your rate, it's worth switching.
"Now is also a good time to look at your other expenses and figure out where you could be saving."
Whitten said creating a budget can limit overspending on non-essentials such as food delivery or online shopping.
"If you've scraped every last bit of savings and you're still struggling, it's time to call your lender.
"It may be able to help get you onto a repayment plan that means you can afford to put food on the table," Whitten said.
Additional rate rises will disproportionately affect female homeowners, according to the survey.
Female homeowners (8%) are more likely than their male counterparts (3%) to say they would seriously struggle with a rate rise and consider selling their home.
On the other hand, 33% of male homeowners would manage well without any lifestyle changes, compared to just 13% of female owners.
| If your home loan rate increased by 3 percentage points (e.g. from 2.5% to 5.5%), how would you manage? | |
|---|---|
| I would manage, but I would have to cut down my spending | 48% |
| I would manage well, it wouldn't change my lifestyle or spending at all | 25% |
| I would struggle a bit, and perhaps fall behind on my repayments or other bills | 14% |
| I have not thought about it | 8% |
| I would struggle a lot, and consider selling my home | 5% |
| Source: Finder survey of 308 Australians with a home loan, July 2022 |
Struggling with the rising cost of interest rates? Here are 4 ways to beat rising home loans.