One in five feels overwhelmed by mortgage debt

Oksana Patron

19 January 2023

One in five Australian homeowners, or 693,000 households, feel they have borrowed too much and had reached their financial capacity, according to new research by comparison site Finder.

Over the span of a couple of months, the average home loan rate in Australia almost doubled, from 3.45% in April to 6.15% in November last year, meaning that the average monthly repayments had grown nearly $1,000 for a $500,000 home loan, from $2,231 to $3,128.

This represented an annual increase from $26,772 to $37,536 in just eight months, with further interest rate increases on the horizon, according to Finder’s analysis.

Queenslanders were the hardest hit group by the amount of debt (26%) and were followed by residents of New South Wales (25%).

According to the study, part of the problem is the fact that Australians were buying properties during a record low interest rate environment, and on top of that, many fixed-rate loans are due to expire by the end of 2023, making these borrowers particularly susceptible to further increases in their monthly repayments.

Finder also found that among the cohort of borrowers feeling the pinch the most were younger buyers, in particular, with one in four generation Z buyers admitting they had borrowed too much.

Discussing the options for those buyers who inadequately factored in the rate rises, Finder’s money expert, Sarah Megginson, advised contacting their lenders as soon as possible.

“Call your lender today and ask if there’s any wiggle room. You’ll be amazed to see what they can offer you to prevent you from moving to another lender,” she said.

Megginson also mentioned other options including refinancing the loan to the cheapest rate, considering a mortgage repayment holiday or even downsizing which was rising in popularity among households forced to cut their expenses.