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More than half of borrowers are willing to make changes to their home loans to accommodate increasing rate hikes, according to a new survey.
The findings are derived from a Money.com.au (Money) survey of 1,018 Australian mortgage holders that explored how financially prepared borrowers feel they are for lifting interest rates and higher cost of living.
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According to the survey, which was conducted by PureProfile in early May, more than half of respondents (51 per cent) confirmed that they would make changes to their home loan in the face of rising interest rates.
The vast majority of this cohort said they would address rate hikes by pivoting to a fixed interest rate, with 33 per cent stating they would do so to their whole loan amount, while 25 per cent said they would do so to part of their loan.
A further one-third of respondents (33 per cent) said they would address this boost by refinancing before rates got too high or unaffordable, while an additional 5 per cent said they would sell their house altogether.
Financial adviser and Money spokesperson Helen Baker commented that this data suggests that more Australians “want to be financially independent and responsible for their assets”.
The founder of On Your Own Two Feet added that it is also indicative that borrowers are “becoming more conscious and knowledgeable of how they need to navigate the current climate of increasing interest rates and inflation, against a downturn in the housing market in many parts of Australia”.
This willingness to change loans was strongest among young people. According to the results, 77 per cent of respondents aged between 18 and 34 confirmed they would either fix at least part of their rate or refinance to deal with rising rates.
Among those aged 35-49, this figure dropped to 55 per cent, and fell further to 31 per cent for those aged over 50 years old.
“Young Australians will have bought recently and must contend with longer-term mortgages than Australians who entered the housing market many years ago,” Ms Baker noted.
“Younger people are also more likely to have a larger home loan and be stretched, as a result of the booming housing market over the last several years.
“It is encouraging that younger Australians will be financially savvy and won’t hesitate to be proactive in restructuring and reconsidering their current loans and lenders.”
The findings follow on from a recent Mortgage Choice survey, which found only around one-quarter of borrowers were confident in refinancing a home loan following increased rates - and therefore highlighted the importance of brokers.
Brokers themselves have tipped that growing rates will result in another lift in refinancing.
Speaking to The Adviser earlier this month, Western Australian broker Casey Stein said: “When interest rate rises are coming through the way they are – that’s a key indicator from the RBA they want things to slow up. That’s going to impact everyone’s costs,” Mr Stein said.
“The biggest cost they’re going to have is their mortgage so [borrowers] are going to look at that and go ‘how are we going to cut this back’.”
Earlier this month, Commonwealth Bank updated its prediction for the future of this cash rate, tipping that it will reach 1.60 per cent during the first quarter of 2023.
[Related: Borrower hesitance to refinance presents opportunity for brokers]
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