Don’t shoot the messenger, but interest rates are more than likely to go up for the fifth consecutive time in a row. In fact, instead of shooting me, if you could send me a cake for telling you this bad news, that would be greatly appreciated.
But all japes aside, the situation is a grim one. As the Reserve Bank of Australia’s Philip Lowe expressed back on August 2, “Inflation is expected to peak later this year.” He additionally noted that the path out of this bad situation is “a narrow one” and “clouded in uncertainty.”
This means that mortgage owners aren’t going to catch a break anytime soon. “After yet another cash rate increase, mortgage repayments for many borrowers are higher than they were a few months ago and likely to climb higher still this year,” stated Finder’s home loans editor, Richard Whitten. He also said, “Through the rest of 2022, many homeowners on variable rates will start to struggle more and we will likely see the number of defaults rise.”
Now, Finder was curious about what another price hike would mean for homeowners, so they conducted a little poll. In July, they asked 308 Australians with a home loan, “If your home loan rate increased by 3 percent (e.g. from 2.5 percent to 5.5 percent), how would you manage?” And the results Finder received were interesting. So let’s dive into those now:
Is It a Smart Move Selling Your House?
According to Finders’ findings, 48 percent of its respondents would manage if their home loan rate increased, but they would have to cut down on their spending. Whether this meant that they’d cancel their Stan subscription, eat out less, or syphon petrol from their neighbours’ car each morning, wasn’t discussed by the participants.
A number of folks reported that they’d be more than fine if their home loan rate increased. As per the survey, 25 percent claimed that they wouldn’t have to change their lifestyles or spending habits at all, while eight percent said that they haven’t even thought about this topic.
However, it’s worth noting that plenty of people would be put in a rough as guts position if home loan rates bump up again. Finder stated that 14 percent of its respondents might fall behind on their repayments or other bills. More concerningly, five percent of these individuals would struggle a ton and would consider selling their home.
Whitten said that selling your home out of desperation should be the last option that you exhaust. “The first thing you can and should do is compare your home loan against others in the market,” he expressed. “Even if you can shave just 0.5 percent off your rate, it’s worth switching.”
This man also had some other useful advice. “If you’ve scraped every last bit of savings and you’re still struggling, it’s time to call your lender,” went Whitten. He explained his reasoning by saying, “They may be able to help get you onto a repayment plan that means you can afford to put food on the table.”