Borrowers not planning for rate increases
New data shines a light on borrowers’ concerns and financial attitudes, showing most are not taking advantage of low interest rates to pay off their mortgage.
The Canstar Consumer Pulse Report 2018 also looked at financial buffers saved by mortgage holders in order to cope with increasing interest rates and/or changes in their financial situations.
Forty-three percent of home loan borrowers said they have less than three months’ mortgage repayments stockpiled, which is the same figure as the 2017 survey.
It is worrying that people were not using the low rates to get ahead before rates inevitably rise.
The reality is we are at record bottom low interest rates for home loans and we know they will go up. A year off, two years off, doesn’t matter. They will go up.
People underestimate what it means when they go up. They’ll go up 0.25 for four or five moves. There’ll be four or five increases. People have to look at where they are today and say maybe I should be getting three or four or six months ahead while rates are low.
With rates this low it’s an opportunity to think about putting a little bit away extra a month.
It can be simple like putting away $50 extra a month or pay fortnightly so you effectively make an extra repayment a month. Do this at the beginning of a loan or maybe I won’t be able to make more than that for the first two years but after that I can look at it.
The prime objective of course is to get people into their property. But if they can get themselves into a better financial position – that is the added service, and, in the future, they’ll be back looking for an investment property or an upgrade.
Canstar’s research also showed that 59% of people have not tried to get a saving on their home loan, but 25% of people had tried and succeeded to get a saving.
The figures also show there has been a decrease in the number of people saving for a home, down from 14% in 2017 to 12% in 2018.
Alongside this figure was an increase in concern about mortgage interest rates rising. Only 7% of respondents in 2017 were concerned over a potential increase, compared to 9% this year.
So, before the Christmas Fever really kicks in everyone should be considering getting ahead of their loan to improve their financial position and put a buffer in their home loans.
Individual circumstances must always be considered, so if you would like some help in assessing your situation and determining your serviceability, contact me on 0418 903 954 or firstname.lastname@example.org