Aussies are increasingly unlikely to meet their loan commitments if rates lift, new research has shown.
Two-thirds of Australians believe that rising interest rates could put pressure on their financial position, while 56 per cent admitted they might need to refinance their home.
These figures come from a new survey commissioned by the Finance Brokers Association of Australia (FBAA), which investigated mortgage and rental affordability for over one thousand Australians.
Asked if they would be able to afford an additional $300 payment per month, over half of the respondents or 57 per cent said “not at all”, while only 9 per cent expressed confidence in their ability to meet the extra costs.
“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 managing director 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.”
Both the Commonwealth Bank and AMP Capital are forecasting the first rate rise to take place in November next year.
The $300 monthly increase is roughly equivalent to an increase of 1 per cent based on an average home loan.
“One per cent is not a large increase,” said Mr White.
“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.”
Eighty per cent of single-parent families and 71 per cent of individuals living in remote areas are among those who believe they would not be able to afford the monthly increase.
Higher-income earners could also be affected, with 46 per cent of respondents with a household income between $2,000 and $3,000 noting they may not be in a position to service their loan.
“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,” said Mr White.
“Add a mortgage increase they can’t pay, and there could be a lot of people in real trouble.”