Three out of four Australian mortgage holders have been negatively impacted by the interest rate hikes and won’t trust the Reserve Bank again, according to new research by finance platform MNY.
The MNY survey of 1,000 Australian mortgage holders showed that the RBA hikes have adversely impacted the personal lives or wellbeing of 75% of the respondents, with three out of four borrowers also saying that they won’t trust the central bank’s forecasts again – even with the appointment of a new RBA governor.
Mortgage interest now averages around 6.5% after 12 interest rate hikes since May 2022. This means households with a $500,000 mortgage on a variable rate have been rocked by an extra $1,500 per month in repayments amid a cost-of-living crisis.
As a result of the successive interest hikes, 49% of respondents said they experienced heightened stress and anxiety, and 29% mental health issues or sleeplessness. The respondents also reported a poor diet (19%), poor physical health (16%), weight gain (13%) and decreased performance at work (9%) as among the impacts.
Mortgage holders’ relationships also took a hit from the OCR hikes, with 8% reporting having worse relationships with family and 11% having worse relationships with their partner over the financial impact of rate hikes. Only 25% reported no adverse impacts.
“While borrowers have faced higher interest rates in previous decades, house prices and, consequently, loans were smaller,” said Sabina Khanusiak, MNY business analyst.
“In 2021, when interest rates were at a record low, more than $305 billion was borrowed to buy or renovate homes in the first 10 months. These borrowers have significant financial strain if they are on, or are about to go on, variable-rate loans.
“When we analysed the pool of respondents who were impacted, almost two-thirds (65%) are living with increased stress and anxiety, suggesting that rate rises have given borrowers very little disposable income. It is impacting all areas of their lives, and it is becoming a social issue as much as a financial one.”
Risk to Aussies’ mental health and relationships
An overwhelming proportion of borrowers aged 18- to 34-years-old said the rate hikes impacted their mental health or relationships (83%) along with introducing heightened stress and anxiety (49%).
By comparison, 78% of 35-54-year-olds are impacted in some way. Fifty-four per cent (54%) reported having higher levels of stress and anxiety, 35% experienced a strain on their mental health, and 33% suffered sleeplessness.
Older age groups were the least affected by rising rates, with just 67% of over-55s having been impacted, mostly by heightened levels of stress and anxiety, at 63%.
“The amount of stress that young Australians are facing due to the increase in interest rates is worrying, especially since many of them are new to borrowing,” Khanusiak said.
“This current economic climate provides no encouragement or reason to buy property, leading to a rental crisis that is causing stress and anxiety for renters alike. These are uncertain times for Australians who are struggling to secure and retain a place to live."
Contrary to RBA Governor Phillip Lowe’s promise in 2021 that rates would not increase until at least 2024, the rates did rise – and 12 times at that – to 4.1% by June 2023, a record high last seen in 2011, when the cash rate peaked at 4.75%.
The MNY survey found that 75% of homeowners would not trust RBA forecasts again, even with the appointment of a new governor, with older Australians the least likely to place their trust in the central bank.
“The RBA has a significant challenge ahead, as keeping interest rates unchanged does not alleviate the financial strain felt by homeowners. Michele Bullock, the RBA’s new governor, needs to regain the trust of 75% of the mortgagor population and help ease the financial burden that a significant portion is experiencing,” Sabina said.
The full survey results, including breakdowns across age groups and states, can be found on the MNY website.
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