More homeowners take action against interest rate hikes, says AMP

By Cameron Thomson · · 3 min read
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As interest rate hikes continue to pressure household budgets, more borrowers are beginning to feel the pinch with most doubtful that the pressure is going to let up anytime soon. 

With more borrowers increasingly facing mortgage stress or what has become known as ‘mortgage prison’ – stuck in a position where they can’t remortgage – it’s no surprise that some are beginning to take action.  

Some homeowners are hoping to improve their financial position, according to a new report by AMP Bank. 

Homeowners are increasingly worried

AMP’s research found that 69% of borrowers were increasingly concerned about their ability to meet their repayments if interest rates continue to rise. This comes off the back of the RBA raising the cash rate by 0.25% to 3.35% earlier in the month – the ninth straight month of increases – with continued hikes predicted to occur. 

With increasing headwinds coming their way, including the prospect of moving from a relatively low fixed rate to a higher variable rate, two-thirds of fixed rate home loan borrowers are preparing themselves ahead of their fixed term ending, says AMP. Of the fixed loan homeowners surveyed, nearly all expected continued rate hikes, which suggests coming off their fixed rate is top of mind.

Savings buffers and reduced spending

Despite facing more difficult economic conditions, noticeable growth in emergency funds amongst home owners has provided an added layer of security. AMP says that 83% of respondents say they have built enough of a savings buffer that could cover them for an extra month of mortgage repayments. 

As well as saving more, households have also been cutting back on discretionary spending and utilising better budgeting. Generally, households have been reducing their spending on groceries, entertainment, clothing, holidays, and gifts to save. 

It’s worth noting as well that more than half of surveyed homeowners are not only reducing spending and increasing saving but also supplementing their cash flow. Of those who have been using additional sources of cash flow, a majority say that it has improved their financial wellbeing.

“In a period of higher costs of living, it’s no surprise that mortgage holders are finding more creative ways to improve their household budgets, including finding a way to create a savings buffer.” AMP’s group executive, Sean O’Malley said. 

The increase in homeowner budgeting and financially savvy decisions has meant that, even though rising interest rates will continue to be a problem, that many might still be in relatively stable positions.

What can homeowners do when interest rates climb?

Homeowners who may still feel financial pressure or fiscally underprepared can still implement strategies to prepare themselves in the event the RBA does continue raising interest rates. 

Some suggestions AMP includes for borrowers who feel behind is: 

1. Financially orient yourself

Make sure you know what financial position you’re in by measuring your ratio of spending and income. This can be measured by utilising a budgeting app, making your own excel sheet, or good old fashioned pen and paper. 

2. Check your home loan

Do you have the right home loan for you? There are many different loans offering a wide range of features from offset accounts to fee free extra repayments. Make sure that your home loan can meet individual needs. 

3. Contact your bank or broker

Don’t suffer in silence, contact your bank or broker for specialised help. Most banks have a financial support help centre that customers can contact. 

4. Get financial assistance

Getting the right financial advice that helps you take control of your money can be invaluable in combating financial stress. Financial institutions, government resources, and comparison sites like Mozo can help get your spending and saving habits in order. 

Are you looking to refinance to a new home loan? Mozo has comparisons of the most competitive home loan providers available to help you get the best loan that works for you.

Mozo may receive payment if you click products on our site. We don’t compare the entire market, but you can compare more home loans here.
Last updated 15 January 2025 Important disclosures and comparison rate warning*
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Loan amount and LVR will affect interest rates.

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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.

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