Australians struggle to keep up with interest rate increases after pandemic housing boom
Australia’s housing market has come a long way from the buying frenzy of the early pandemic as a significant portion of recent homebuyers voiced their regret over how much money they had borrowed.
According to a recent survey by Finder.com.au, one in five Australian homebuyers believe they borrowed too much on their home loan. Out of the 310 mortgage holders that served as respondents, homebuyers in Queensland were found to be more likely to have such regrets (26%), with borrowers from NSW coming in second place (25%).
Furthermore, male borrowers were found to be more likely to have overcommitted on their loans as 23% of men conveyed regret over how much they borrowed, versus 19% of women.
In terms of age, this regret was more prominent among younger homebuyers, with one in four Gen Z buyers admitting that they had borrowed too much.
Record high rates keep financial pressures up
“Many Australians bought property during a record low interest rates environment and didn’t plan for what they’d do if rates went up,” Finder home loan expert Sarah Megginson told The Daily Telegraph.
Megginson said the low interest rates seen in 2020 and 2021 made many buyers feel like “they were getting a good deal.” However, with interest rates having soared to record highs, those who failed to stress test their budgets are undoubtedly feeling “a lot of financial pressure.”
Finder’s analysis also estimated that 693,000 households are struggling with “too much” mortgage debt as the average home loan rate was found to have almost doubled between April and November, jumping from 3.45% to 6.15%. This means that the average monthly repayment on a $500,000 loan has ballooned from $2,231 to $3,128, indicating an annual increase from $26,772 to $37,536.
The RBA has hiked the official cash rate by 300 basis points in 2022 and experts have predicted that the hikes won’t halt in the new year.
