Mortgage stress is up: Are you comfortable with your home loan rate?

By JP Pelosi · · 2 min read
Fact Checked
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New research from Roy Morgan shows that 1,514,000 mortgage holders (30%) were 'at risk' of 'mortgage stress' in the three months to October 2023. 

This period included three RBA meetings at which interest rates were left unchanged and was before the increase on Melbourne Cup Day. 

Despite a slight easing in mortgage stress in October, this was only the third time in the history of the index that over 1.5 million mortgage holders were considered 'at risk'. 

Meanwhile, the number of mortgage holders considered 'extremely at risk' of mortgage stress is now at 967,000 (20%), which is significantly above the long-term average over the last 10 years of 14%. 

Credit reporting firm Experian has similarly looked into Aussie households that are at risk of ‘interest rate cliffs’, where mortgage owners come off a low fixed home loan rate to suddenly be slugged with a much higher variable rate. 

It asked leaders in lending risk about this and 34% believe multiple waves of increased borrower hardship have already started, while 30% believe Australia will soon experience more cases of borrower hardship.

Loans taken out more recently are showing elevated signs of stress, with borrowers that took out home loans since 2019 three times more likely to miss repayments than those that took out a mortgage before 2015 and twice as likely as mortgages opened between 2016 and 2019. 

“In the last two years the levels of missed repayments and arrears are getting progressively worse, in a shorter period of time,” Experian’s director of client advisory, credit services, Charlotte Rankin said.

“Within five months, more than 1 in 200 new mortgages opened at the end of 2022 were in arrears, compared to it taking 24 months to reach similar levels for mortgages opened in early 2021.” 

According to recent Mozo analysis, switching from a rate starting with '2' to one starting with '6' could mean an extra $780 a month in repayments on a $350,000 home loan over a 25 year loan term. 

The same rate change on a $1,000,000 mortgage, over the same period, equates to a whopping $2,229 a month more.

For many of the homeowners surveyed, this is their reality. Two out of five surveyed said they had already switched from fixed rates starting with '1' or '2' to variable rates starting with '5' or '6'.

Home loan interest rate comparison is essential 

All of this data points toward the importance of doing your research before taking out a home loan. 

Home loans are typically large sums of borrowed money but because they're paid back over many years, it might not seem so daunting. However, the interest rate you get on your home loan is crucial because it can determine how much extra money you pay on top of the loan each year. 

At Mozo, we do the hard yards for those looking for a good value home loan. Our experts scour the marketplace to find out which home loans offer customers the best value, flexibility and features. You can start by comparing some of the top home loans below. 

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can compare more home loans here.
Last updated 14 October 2024 Important disclosures and comparison rate warning*

Home loan comparisons on Mozo

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  • Fixed Home Loan

    • Owner Occupier
    • Principal and Interest
    Interest rate
    5.84 % p.a.
    Fixed 1 years
    Comparison rate
    5.93 % p.a.
    Initial monthly repayment
    $2,852
    Go to site

    Competitive fixed rate on up to a 30 year loan term. No application fees to pay. Additional repayments up to $20,000 per year without penalty. Free online redraw. Optional 100% offset feature ($10/month) 10% minimum deposit. Fees & charges apply, Australian Credit Licence 237879 is held by Bendigo and Adelaide Bank Limited, the credit provider.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

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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

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

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