Almost 1 million Aussies set to default on their home loans: Digital Finance Analytics

While many Aussies may already have begun changing their spending habits to keep up with their rising home loan repayments, experts are now predicting that this could be just the tip of the iceberg for homeowners.  

The warning has come in response to the number of banks that have now increased their variable rates due to mounting funding issues.

Macquarie Bank is set to hike its variable interest rate for owner-occupier loans by 6 basis points come Friday, while the big four continue to hold out. However, financial analyst, Martin North believes that it’s only a matter of time until the big banks join in.

"I think that by September we will see these rate rises in place, unless the international financial markets change direction quickly,” he said, in a recent ABC report .

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North predicts that should the big banks increase their rates by at least 10-15 basis points, 1 million Aussies would then defaults on their mortgages.

"Today 975,000 households across Australia with owner-occupier mortgages are right on the edge now," he said.

"If rates went up by 0.15 percentage points, that would go up closer to the round million."

According to our mortgage repayment calculator, if you borrowed $300,000 to be paid back over a 30 year period on a variable interest rate of 4.35%, your monthly repayments would total to $1,493. However, if this rate were to increase to 4.50%, your monthly repayment would jump to $1,520 - an extra $27 per month, or $324 a year. 

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'Mortgage stress' to become normal

 Mozo recently reported on the one in three Aussies suffering from ‘mortgage stress’, meaning they aren’t earning enough to keep up with their repayments and other living expenses. 

The data collected by Digital Finance Analytics found that Victoria and New South Wales were the top two states when it came to the highest levels of mortgage stress.

“Our surveys show that households are keeping their wallets firmly in their pockets as they try to manage ever-tighter cash flows,” North said. 

 “Household debt continues to climb to new record levels — mortgage lending is still growing at an unsustainable two-to-three times income.”

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However, an even bigger cause for concern is the potential number of ‘mortgage prisoners’. 

These are the Aussies who were once considered non-risky borrowers, but now cannot afford to refinance to a cheaper loan due to the recent change in lending standards. 

The increased funding pressure felt by the banks also spells bad news for new borrowers, as institutions have had to introduce even stricter lending requirements for first home buyers. 

Questions requiring details of a borrower’s Netflix account or grocery bill are now being asked by banks during a borrower’s application. 

“Banks take their obligation to determine customers’ ability to repay a home loan very seriously and work hard to ensure this process is both as accurate and simple as possible,” said an Australian Banking Association spokesman. 

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So if you’d like to find out if your budget could handle a rate rise, check out our rate change calculator before heading over to our home loan comparison tool to compare your refinance options.