For ‘at risk’ home loans, it might be time to refinance?

One half of the brain is occupied with thoughts of money. Mortgage Stress.

More than one million mortgage holders are expected to be ‘at risk’ this month, with more to come in July, according to Roy Morgan. 

It’s a staggering number when you realise this figure is almost on par with the number of people who were at risk during the global financial crisis of 2009. 

Wondering why it’s so high? Well, there are reasons and it’s related to a generally higher cost of living, inflation and higher interest rates. 

More specifically …

  • The Reserve Bank of Australia’s rate hiking cycle is having an impact. It was recently announced that the RBA would be upping the official interest rate to 4.10%. This typically impacts the cost of home loans. So, if you have a variable interest rate, it might continue to go up.

With this information in mind, has keeping up with your home loan repayment plans become almost too taxing on your finances as of late? You’re not alone. 

Are you an ‘at risk’ mortgage holder?

Folders of bills and income. A mortgage loan is highlighted.

Depending on how much you make and spend, an ‘at risk’ mortgage holder is someone whose monthly mortgage repayments consume around 35% of their household income.

But when the interest owed on your home loan is about a third of your income, you may be considered ‘extremely at risk’, says Roy Morgan. 

If you’re worried about defaulting on your home loan by falling into either risk category, there are some ways you could lighten the load.

Here are a few ideas:

Renegotiate rates with your lender: If you’re on a variable rate, your initial home loan doesn’t necessarily mean you’re locked in. (If you’re on a fixed rate however, you will be locked in for a set period).  

Try your hand at negotiating for a better rate and repayment plan - it’s worth having the conversation! For others, it might be time for a new home loan altogether. This approach is more involved, but it can also be beneficial in the long term. 

Refinance your home loan. There are some steps involved but it could be the best financial decision you make. Why? Well by refinancing you could end up with a home loan with a lower annual interest rate and fewer fees. You might even get some nifty features that your existing lender doesn’t offer. You might also move from a variable interest rate home loan to a fixed rate loan or split your balance.

It’s true there are usually some penalty fees for switching mortgage lenders. On the other hand, you can also save a fair bit of money down the line on interest. It’s definitely worth considering if you have been with the same lender for a while and feel there would be better options out there.

Maybe enlist the help of a financial advisor. A little guidance is all we need sometimes, and getting a fresh pair of eyes on your situation can help you to come up with a solid plan. There are plenty of experts out there to call on. 

Finally, compare your home loan

Don’t know where to start looking? That’s alright! You can compare some options below, or check out our home loan comparison calculator to see whether your current home loan is still the right one for you. 

Home loan comparisons - last updated 31 May 2024

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  • Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    6.25% p.a.
    fixed 3 years
    6.20% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

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  • Variable Home Loan 90

    Principal and Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    6.04% p.a. variable
    6.06% p.a.

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

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  • Discount Variable Home Loan

    Owner Occupier, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a. variable
    6.01% p.a.

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

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  • The Better Home Loan Special Offer

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.14% p.a.

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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