Following the Reserve Bank’s latest official cash rate hike, mortgage stress is building up in households across Australia.
On Nov. 1, the official cash rate was raised for the seventh consecutive month to now sit at 2.85%, the highest it has been in seven years.
Aussie Home Loans says the record lift to the cash rate will have many Australians concerned. According to research conducted in July by the broker franchise network, 53% of mortgage holders are expected to go into “significant mortgage stress” if the official cash rate hits 3%.
Aussie state broking manager Karen Sorrenti (pictured above) said with so many mortgage holders in significant mortgage stress, it was likely to have flow on effects to other industries.
“Meanwhile, many may be feeling stuck and possibly finding themselves as ‘mortgage prisoners’,” Sorrenti said. “Of those we surveyed, 56% said they believed the cash rate would only go as high as 2.5% and 30% of mortgage holders would start considering taking action about their mortgages when the home loan rate goes beyond a certain limit.”
Sorrenti said only 24% of mortgage holders surveyed would consider taking action when the RBA cash rate rose over a certain limit; however, now at an unexpected rate, that was likely to happen.
“Our research findings indicated the multiple ways that Australians will be trying to cope with the increased rate increases,” she said. “We had 64% say the first things that would go include entertainment, 59% saying retail, takeaway food, restaurants, bars, etc, while 38% will cut down on cosmetics. However, for some, a way out could be harder to navigate.”
Read more: Reserve Bank decides on interest rates
Sorrenti and Aussie Home Loans have compiled a list of seven ways homeowners can avoid mortgage stress:
