Home loan hell: Scary proportion of salaries swallowed up by mortgage
Australian mortgage holders have hit breaking point, according to new research by Finder.
A Finder survey of 1,062 respondents – 346 of whom have a mortgage – revealed 2 in 5 (40%) pay more than 30% of their earnings to their home loan – the widely accepted threshold for mortgage stress.
That's 1.3 million mortgagors who are having a huge chunk of their salaries absorbed by mortgage repayments.
Worryingly, almost 1 in 4 (23%) contribute more than half of their income towards home loan instalments.
Graham Cooke, head of consumer research at Finder, said soaring interest rates have dealt a severe blow to household finances.
"Mortgage holders are facing the highest home loan costs in decades, with four in ten being in mortgage stress.
"For many households, mortgage payments have skyrocketed far beyond their initial expectations, following the 13 interest rate hikes that began in 2022.
"Many households are paying far more on their mortgages than expected due to repeated rate hikes."
Cooke said there is increased optimism that rates might soon drop following a few big banks slashing their fixed rates in recent weeks.
"If you're seeking financial stability, budgeting ease, and immediate savings, fixing your home loan could be a worthwhile option.
"But if you're doing it to purely save money, fixing your loan might backfire if variable rates drop dramatically in the near future."
Cooke urged mortgagors to plug any money leaks such as paying too much for utilities and other expenses.
"Small savings can add up significantly, making a big difference at the end of the month.
"If possible, cut down on all discretionary spending such as takeaway and divert those savings to an emergency fund," Cooke said.
| Approximately what proportion of your income goes to paying your mortgage each month? | |
|---|---|
| Percentage of income | Percentage of respondents |
| 10% of income | 12% |
| 20% of income | 18% |
| 30% of income | 30% |
| 40% of income | 17% |
| 50% of income | 11% |
| 60% of income | 7% |
| More than 60% of income | 5% |
| Source: Finder survey of 346 respondents who have a mortgage, June 2024 |
Methodology
- Finder's Consumer Sentiment Tracker is a monthly recurring nationally representative survey of more than 60,000 respondents.
- Figures in this release are based on 346 respondents with a mortgage from June 2024.
- The Consumer Sentiment Tracker is owned by Finder and operated by Qualtrics, an SAP company.
- The survey has been running monthly since May 2019.
Westpac and CBA have slashed their fixed home loan rates up to 0.8% – is it time to fix?