Interest rates may be on the way down, but keeping up with home loan repayments remains a financial headache for many Australians.
A recent Your Home survey has revealed that more and more homeowners are cutting back on household spending in order to meet mortgage repayments.
Despite recent interest rate drops, almost 40 percent of the 850 people surveyed reported cutting back on their spending to pay the mortgage.
The Reserve Bank of Australia has slashed interest rates by 3 percent since September this year. The cash rate now stands at 4.25 percent.
While the monthly repayment on a $350,000 mortgage has fallen by more than $700 due to the recent rate cuts, it’s luxuries that are being sacrificed by Aussie families, the survey found.
The common items taking a budget backseat included: entertainment/going out (44 percent); eating out/ordering takeaway (44 percent); travel and holidays (37 percent); clothing (36.5 percent); and household items (28 percent).
As one respondent commented: “It’s not the home loan that’s the problem, it’s the cost of living sucking all the fun out of life.” Another said: “I think it’s going to get worse before it gets better.”
Females were found to be more likely to have already cut their spending than males (females 72 percent, males 65 percent) and those in regional areas reported being more concerned about economic downturn than city dwellers (regional 57 percent, city 50 percent).
Mortgage eats into household income
Around 20 percent revealed they were having difficulty meeting their home loan repayments with 26 percent of people paying more than 40 percent of their income on mortgage repayments.
A homeowner is defined as being in mortgage stress if they are paying more than 30 percent of household income on mortgage repayments.
The survey also revealed over 64 percent of respondents felt worried about their financial future. According to the results, the most worrying concerns for homeowners are grocery costs, property prices and superannuation.
The most concerned group were people just on the brink of retirement with 73 percent of 50- to 64-year-olds feeling that their personal finances had been affected in the current economic climate.
One respondent summed up how many in this group are feeling. “I feel very concerned about being able to retire comfortably.” He was hoping to retire early by building up investments and super only to end up with less than what he put in.