New research from mortgage broker iSelect revealed that seven out of 10 Australian households are having trouble meeting their monthly mortgage repayments. In fact, 454,000 households have reported that they are experiencing mortgage stress as they are struggling to meet their repayments in spite of the recent rate cuts.
Of all the respondents, only 11 per cent switched providers or rates following the May 2016 rate cut, suggesting that most mortgage holders are unlikely to take any action following a rate cut. In total, 65 per cent of Australians did nothing following the RBA’s rate drop in May, with 30 per cent of them saying that taking any action ‘would not be worth the effort.’ As a result, many mortgage holders could be paying much more than what they need to each month.
“While record high property prices continue to put home buyers under stress when it comes to mortgage repayments
, many homeowners often underestimate the savings that could be gained by switching to a new loan with a lower interest rate,” said Laura Crowden, spokesperson of iSelect. She added that homeowners may be put off by exit fees, which are generally much lower than expected.
But this should not be the case as lower interest rates can ease the pressure on the household budget and even shave years off the loan.
“Homeowners should really be taking advantage of these record low rates to reduce the length of their loan,” Crowden said. “If you switch to a lower interest rate or your current lender drops your rate, ask them to keep your repayments the same and you could quickly build up a handy buffer.”
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