Mortgage holder survey reveals the disturbing proportion of incomes spent on Australian home loan repayments

The widely accepted threshold for sustainable mortgage repayments is 30 per cent of the mortgage holder’s income.

But a recent survey has shown an alarming number of Australians are blowing out that budgeting ratio.

Two in five homeowners are paying more than 30 per cent of their wages on mortgage repayments, with almost one in four spending over half of their income on the instalments.

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The Finder survey of 1062 respondents — only 346 of which had a mortgage — in June, found that 7 per cent paid 60 per cent of their income on mortgage repayments, and 5 per cent pay even more than that.

Roy Morgan research in August found that in the three months to July, 1,604,000 mortgage holders (29.8 per cent) were “at risk” of mortgage stress.

Since the first of the 13 interest rate rises in 2022, the number of Australians “at risk” of mortgage stress has increased by 797,000.

The number of Australians now “extremely at risk” of mortgage stress, is 982,000 (18.9 per cent of mortgage holders).

The key risk for this entire cohort was job security, Roy Morgan said, with unemployment having “largest impact on income and mortgage stress.”

Mortgage stress is the name for the financial stress of those whose payments are exceeding that golden 30 per cent threshold, and can impact a person’s ability to pay for essential expenses, such as food and power.

The effects of mortgage stress can also adversely affect health.

“When stress is prolonged, it can have a significant impact on someone’s physical health, causing chronic pain and impacting their digestive system, heart, sleep, memory and concentration,” the Australia Psychological Society said.

Easing repayment pain

Finder head of consumer research Graham Cooke said, after several big banks slashed their fixed-term interest rates late last month, “there is increased optimism that rates might soon drop”.

So, if you’re seeking financial stability, budgeting ease, and immediate savings, fixing your home loan could be a worthwhile option, he said.

“But if you’re doing it to purely save money, fixing your loan might backfire if variable rates drop dramatically in the near future.”

Cooke said homeowners could alternatively tighten their budgets in other areas — he suggested shopping around to ensure that utility rates and other expenses were not unnecessarily high.

He even urged mortgage holders to create an emergency fund.

“If possible, cut down on all discretionary spending such as takeaway and divert those savings to an emergency fund,” he said.

“Small savings can add up significantly, making a big difference at the end of the month.”

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