New study reveals: 1 in 3 households would struggle to meet mortgage repayments if rates rose this year
Pessimistic or honest? That’s the question on our minds, thanks to a new survey by the Salvation Army, which found that Aussies are struggling to meet mortgage costs and could feel the heat if the Reserve Bank raises rates this year.
The report found that 10 million Aussies believe homeownership is a dead dream and 11 million Aussies revealed that living comfortably during retirement may also be out of reach, forcing them to live “basic” lifestyles or will have to “struggle to get by”.
“With more than half of their income going towards housing, many Australians simply can’t afford to save money,” said Major Paul Moulds, an officer at the Salvation Army.
Current homeowners were also doing it tough, with two-thirds of homeowners reportedly seeking out emergency relief services offered by the Salvation Army in order to ease the financial strain
“Forty percent of people say their financial situation is affecting their wellbeing, their family life and their social life,” explained Salvation Army financial counsellor, Kristen Hartnett.
And when looking to the future, 1 in 3 households admitted that they would struggle to meet their monthly repayments if interest rates rose this year.
So with this news, we sat down with Mozo’s Data Manager, Peter Marshall, to ask what Aussies could be doing now to prepare for a potential rate rise.
Shop around and compare
The best defence Aussies have against rising rates is to regularly review your home loan to make sure you’re still on the lowest rate around.
“Make sure you’re with a lender offering a low and competitive rate, and if you’re not, it might be time to start comparing other offers on the market,” encouraged Marshall.
“Using online calculators can help homeowners see the potential savings cheaper loans can offer.”
Save as much interest as possible
Home loans aren’t what they used to be and now come with specific features that can help you save heaps of cash by cutting back interest. For example, Marshall suggested making extra repayments to save on interest in the long run.
“By making extra repayments now while rates are low, you'll lower the impact of higher rates later on."
Use an offset account
An offset account is a home loan feature attached to your mortgage. Any money that is deposited into this account is offset against the principal of your loan, reducing the amount of interest you’ll pay.
“If you can’t commit to consistently pay off your loan, put as much money as possible into an offset account - it’s a super simple, effortless way to save on interest.”
Turn to a savings account
But if your loan doesn’t come with an offset account, putting the money into a high interest savings account is a great alternative.
“Even though it may not make a huge difference, it’s important to remember that every dollar does count!”
So if you’re an Aussie thinking about refinancing your loan before the rate hike, head over to our home loan comparison tool to compare some of the top refinance deals on the market.