New research shows homeowners may have to take “drastic action” if interests rates remain high until next year.
The study by financial comparison site Finder found an alarming 5 per cent of homeowners — about 165,000 households — would have to sell their house if mortgage rates remain high.
The site, which surveyed homeowners, found about 891,000 Australian households are not prepared for interest rates to remain high until 2025.
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Finder personal finance expert Sarah Megginson said Australians who were counting on a rate cut by now have been “stretched thin”.
“Many homeowners are stretched so thin financially, they’re facing the prospect of having to sell their home or they’re turning to loved ones for support with paying their bills,” Megginson said.
“With interest rates projected to remain high until next year — and some even calling for a hike in August — mortgage-holders could be waiting longer than they expected for this pressure to (ease).”
Finder’s research found 4 per cent of homeowners would need to borrow money to afford the mortgage repayments if rates rise, a further 3 per cent would have to rent out a room, and 2 per cent would need to ask for a repayment holiday.
More than 2 in 5 homeowners said they needed to reduce expenses elsewhere to compensate for higher mortgage payments, and 5 per cent took on a second job to help with the extra cost.
“Now is the time to take a look at your budget and look for areas where you can save money on your household bills and cut back on discretionary spending,” Megginson said.
“A good place to start is insurance: car and home insurance premiums have skyrocketed over the last 12 months, so shopping around for a better deal is crucial.
“If you’re struggling to make your mortgage payments, communicate openly with your lender as they will be able to offer hardship programs such as a mortgage holiday.
“This can extend your loan term and add thousands of dollars to your original loan amount, so it costs more longer term but as a short-term strategy it could keep you from losing your home.
“Every bank has these hardship policies, so be upfront and transparent with them so you can get access to the best possible support.”