3 in 4 home owners gripped with mortgage anxiety amid rising rates, report shows

Karen Sorrenti, the state broking manager at Aussie Home Loans, said the worrying figures indicate that most Australians are “ill-equipped and under-educated” on how to manage their home loans in the face of a rising rate environment.  

“[A] staggering number of mortgage holders have not taken action or investigated their alternative options which are key factors in addressing the mental and emotional strain,” Ms Sorrenti said. 

To back this observation, the expert highlighted that almost three in 10 mortgage holders (or 28 per cent) did not even consider that the cash rate would increase at all when crunching the numbers for a home loan, despite having to account for it in their home loan assessments. 

Meanwhile, another four in 10 or only 38 per cent of mortgage holders have financial buffers in place for the impact of a cash rate of 3 per cent or under, data showed.

“With the increased cost of living pressures, there’s no doubt this is a stressful time for many Australians, particularly mortgage holders,” Ms Sorrenti stated. 

Increasing anxiety among mortgage holders has also put a strain on home owners’ personal wellbeing and is now having a negative flow-on effect on household dynamics, according to Ms Sorrenti. 

“Our latest research shows almost one in five Australians (18 per cent) with mortgages are dealing with ‘significant mortgage stress’ and a further four in five (81 per cent) confirmed the rising cash rate and upward cost of living is a growing reality, placing unwanted tension on their household,” she stated. 

Further highlighting that there is an education gap among Aussies when it comes to managing mortgages, data showed that only one in seven or 14 per cent of mortgage holders have been on the front foot and have taken steps to review their home loans as soon as the first cash rate rise happened in May this year. 

She highlighted that home owners must have the initiative to reach out to professionals and do their research in order to know their options and take corrective steps that will help manage increasing costs of living and reduce anxiety. 

On that note, Ms Sorrenti shared seven savvy ways to ease anxiety due to rising mortgage rates: 

1. Know your numbers. Ms Sorrenti advised borrowers to always be up to date on the current rate on their mortgage. If the home loan is on a fixed rate, she advised borrowers to ensure that they are aware of when the term ends. 

2. Financial literacy is key. The expert advised that there is no better time than now to boost your financial literacy. “If you’ve avoided financial literacy, now is the time. It’s the gateway to managing or better avoiding financial distress,” she stated. 

3. Be one step ahead. With no shortage of forecasts on the trajectory of interest rates in the coming months and how it can potentially impact repayments, Ms Sorrenti recommends borrowers “do some calculations”. “Be one step ahead on what you can afford for repayments and what amount would put you on the path to financial strain,” she said.

4. Be aware of your financial situation. The expert advised borrowers to take a “mindful money approach” and to focus on their full financial position. 

5. Be money-smart when refinancing. When refinancing, Ms Sorrenti recommends choosing a home loan with low or zero fees to reduce costs. 

6. Take advantage of refinancing cashback offers. As home loan interest rise, there are now an increased number of Aussies who are looking to refinance their existing home loan for a more favourable rate. This trend tends to heat up competition among banks and lenders, which generally means offering bigger sign-up incentives to new customers. Ms Sorrenti advised home owners to take advantage of these cashback offers. 

7. Consider an offset account to reduce the amount you pay in home loan interest. For those looking to lower their mortgage repayments, Ms Sorrenti called on borrowers to check if the loan offers an offset account feature. 

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