July 16, 2024

More than half a million Australians are on “survival mode” when it comes to their home loans, paying interest-only to avoid delinquency.

A survey by Finder revealed 21 per cent of respondents – equivalent to 693,000 people – had made the change to paying the bare minimum on their mortgage.

And six per cent of borrowers – an equivalent of 198,000 people – were doing so to avoid falling behind on repayments.

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Finder home loans expert Richard Whitten said millions of Aussie households were in survival mode.

“Such a large portion of people’s earnings are allocated to their mortgage and spare cash has been extinguished,” he said.

“A growing number of Aussies are struggling to make their mortgage payments due to cost of living pressures and can’t continue on the path they’re on.”

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The number of mortgage holders defaulting on their loans has ticked higher during the past few years.

Finder analysis of the Australian Prudential Regulation Authority data showed $14.6 billion worth of home loans were between 30 and 89 days past due in March 2024 – up 65 per cent from $8.8 billion in December 2022.

Overdue mortgages have been rising each quarter over the past year and a half – now accounting for 0.9 per cent of all outstanding home loan debt, up from 0.62 per cent in December 2022.

Whitten urged struggling mortgage holders to seek financial hardship assistance from their lenders.

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“Banks have a responsibility to support customers experiencing financial stress, so put shame aside and speak up if you are in that position to ease the burden until you can sort out serviceability,” he said.

He also said all borrowers should make sure they’re on a competitive interest rate.

“You should be looking for an interest rate starting with a ‘five’ or a low ‘six’ – otherwise you’re paying too much,” he said.

“The start of a new financial year is a great time to do a mortgage audit and compare whether there are better deals around.”

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