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Australian households may be paying off their mortgages more slowly than assumed, according to a ratings agency.
A study by Fitch Ratings found that Australian homeowners are paying about 1.5 to 2 per cent more than is required from their loan each year, Fairfax Media reported.
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This means that repayments have not greatly changed since the GFC, according to analyst James Zanesi.
“The idea that Australian borrowers are far ahead of schedule is not really reflected for the average borrower. It’s true that some borrowers are ahead of schedule, but not all borrowers,” he said.
According to the Fairfax article, the study found that the size of early repayments was “surprisingly low” – contradicting previous reports by the Reserve Bank of Australia which claimed the percentage of Australians making voluntary repayments was far higher than for borrowers in other countries.
The new data reveals that Australia’s mortgage repayments are only slightly ahead of European countries, which means that homeowners may have less of a buffer than originally thought against any economic downturn.
The Adviser recently reported that brokers have mixed views about advising clients to pay off loans ahead of schedule.
Smartline executive director Joe Sirianni is one broker who feels that low interest rates have given borrowers an opportunity to make huge savings.
“There’s no doubt that now is the time to pay down debt more aggressively,” he said.
