Interest rates Australia: Startling number of homeowners behind on repayments

News Corp Australia Network

Successive interest rate rises have crushed household budgets and many Aussies are now struggling to repay their mortgages.

About one in eight mortgage holders across Australia said they missed a repayment in the last six months, a new Finder.com.au poll has revealed.

Among those who said they missed a repayment, just under half had missed multiple monthly repayments.

The research showed 7 per cent of all mortgage holders surveyed missed one home loan repayment in the past six months, while 6 per cent missed more than one repayment.

The leading cause for missing a repayment was rising interest rates.

A small proportion of mortgage holders (2 per cent) had asked their lender for a repayment holiday or applied for hardship.

Finder.com.au home loans expert Richard Whitten said mortgage stress was on the rise.

“Households are really struggling with the monthly outlay and some just can’t keep up,” he said.

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“Nine consecutive rate hikes from the RBA means an Australian with the average loan size of around $600k will be paying roughly $1,000 more per month compared to what they were paying in April last year.”

One in four (26 per cent) of those who missed a repayment in the past six months said they ran out of money after paying other bills.

About 37 per cent said they missed a repayment because of higher interest rates, with 15 per cent noting they believed they would miss a future repayment if rates rose further.

One in three mortgage holders who missed a repayment said they simply forgot to pay on time.

Mr Whitten said some mortgage holders were struggling to keep up with the frantic pace of rate rises, with the Reserve Bank’s nine cash rate rises since May the fastest cumulative rate rise in 30 years.

“With (average) mortgage rates shooting over 5 per cent in 2023, Aussies who had been diligently servicing their monthly repayments are finding it harder to do so.

“With further rate hikes predicted – things could be about to get worse.”

It comes as recent income and mortgage analysis revealed housing affordability is creeping up to the levels last seen in 1990, when rates were at a record 17.5 per cent.

Housing experts said affordability could get worse than it was back then, despite rates being lower, because households had much larger debts relative to their income.

This made them more vulnerable to even small interest rate movements.

A typical mortgage back in 1990 was about $80,000-$100,000 when rates were at record highs. Today it’s closer to $600,000 nationally, but considerably higher in larger capitals.

A family buying an average price Sydney house would need a mortgage of about $1m if using a 20 per cent deposit, while in Melbourne they’d need a $750,000 mortgage.

Mr Whitten said homeowners should try to negotiate a more competitive interest rate with their lenders.

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“If you think your lender can’t give you a good enough deal then find something better and switch,” he said.

“If you know you’re going to miss a payment, talk to your lender first. It’s better to negotiate some kind of hardship arrangement or a repayment holiday than to simply stop repaying the loan. This harms your credit score and puts you at risk of a default.”