Over 50% of Australians with a mortgage would be unable to meet repayments if there was a 1% rise in interest rates, according to a new study from the Finance Brokers Association of Australia (FBAA).
The survey asked Aussie borrowers how prepared they were for a $300 increase in repayments, the equivalent of a 1% rise in interest rates.
56% said that they would need to look at refinancing, while a huge 75% said that rate rises would put pressure on their finances.
Furthermore, 57% said that they would not be able to meet repayments if rates rose by just 1%. That included 80% of single parents, 70% of baby boomers and 71% of people living in remote areas.
The cash rate is expected to rise for the first time in over a decade at some point towards the end of 2022 or in early 2023, according to fixed rate rises already made by major lenders.
“Many Australians are clearly on the brink and are sleepwalking into disaster, living in the false hope that rates will stay this low,” said FBAA CEO Peter White.
“This survey is a wake up call and shows that even a small rise in rates – which is looking more likely next year with rising inflation - could be catastrophic for our nation,”
“Shockingly 57 per cent of people paying a mortgage or rent answered ‘not at all’, and we are talking about an increase equivalent to only one per cent based on the average home loan.
“One per cent is not a large increase. It will happen and with the RBA recently deciding not to intervene to stop increasing yields on three-year government bonds, it will likely happen soon.
“My message to Australians is that we must be better prepared.”
“The housing market has soared and there is a reasonable chance will undergo a correction, meaning that those with low deposits who have stretched themselves to make large repayments could see themselves with negative equity, owing more than the value of the property.
“Add a mortgage increase they can’t pay, and there could be a lot of people in real trouble.”
