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New research from credit bureau Experian has found that a quarter of Australian mortgage holders are “extremely concerned” about the impact a potential 1.5 per cent interest rate increase would have on their ability to service their loan.
Following calls form the OECD for the RBA to begin hiking rates as early as next year, the Experian study found younger mortgage holders were far more worried about a rate hike, with 26 per cent of Millennials (18-34-year-olds) and 26 per cent of Gen X (35-55-year-olds) saying they were ‘extremely concerned’ about their ‘ongoing ability to make mortgage repayments’ if interest rates increased by 1.5 per cent. This compared to just 10 per cent of Baby Boomers.
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Suzanne Steele, managing director of Experian Australia/NZ, said the results are particularly concerning for younger generations who were most likely first home buyers, that were the most in debt generation and also the most likely to miss repayments and feel financially stressed.
Key research findings (Experian):
• On average, Millennials with a mortgage, credit card or personal loan are $428,000 in debt, owing $146,000 more to credit providers than the average GenX and Baby Boomer
o Average mortgage debt: Millennials $390,000, GenX $328,000, and Baby Boomers $189,000
o Average credit card debt: Millennials $12,700, GenX $8,100, and Baby Boomers $4,300
o Average personal loan debt: Millennials $26,000, GenX $20,000, and Baby Boomers $15,000
• 22 per cent of Australian Millennials had been unable to make a mortgage repayment in the last 12 months, which is twice as many as the overall market average (11 per cent)
• Millennials have applied for more than twice as many credit cards, mortgages and personal loans as the average GenX or Baby Boomer in the last 12 months and were also the most likely to be declined in their credit applications
• 55 per cent of Millennial mortgage holders had reduced spending on “essential items”, 38 per cent had worked additional hours or a second job and 33 per cent had borrowed from friends or family to ensure they could service their debts and commitments
[Related: Rate hikes 'normal' says former MFAA chief]
