Most Australian borrowers are already taking positive steps to cushion their finances against rising interest rates, according to new research.
The results of a survey commissioned by AMP Bank confirm that while an increasing number of mortgage holders are concerned about rising interest rates, the majority have built a savings buffer.
The key findings of the research show:
– The majority of people surveyed, 83%, have built a savings buffer and have access to savings to cover an extra month’s mortgage repayment;
– More than two thirds (71%) have made changes to their household budgets – most commonly reducing spend on groceries, entertainment, clothing, holidays and gifts – to account for higher interest rates;
– People with children and those under 44 noted the highest impacts, with 79% of these groups having adjusted their household budgets, compared with the national average of 71%;
– Aside from reducing spending, 54% have found other ways to supplement their cashflow and income to increase their savings buffers;
– 74% of those people said actions they have taken have helped to improve their sense of financial wellbeing.
AMP Bank’s research found that only 45% of people were confident that their current rate was competitive, and that half (49%) were considering refinancing in the next year.
Two-thirds of respondents (62%) who have a fixed rate component to their mortgage also say they are taking steps now to prepare for the end of their fixed rate term. The vast majority (96%) expect interest rates to continue to rise.
AMP Bank Group Executive Sean O’Malley observed that steps like reviewing cashflow, setting a budget and regularly shopping around for a more competitive interest rate offer are practical ways to help reduce financial stress.
“Many Australian homeowners will find themselves in a higher interest rate environment as they roll-off fixed home loans in the months ahead”, O’Malley said.
“If not already, it’s a good idea to talk to your bank or broker to understand your options and get resources and help tailored to your circumstances.”
Tips for managing financial wellbeing
Find your bearings: Start by clarifying exactly where you are financially, including both spending and income. Then take advantage of one of the many budget/tracking apps that provide a clear view of your spending patterns, such as ASIC’s MoneySmart tools.
Check your home loan is right for you: There is a wide range of home loan products on the market that come with different features based on customers’ preferences, needs and eligibility. Consider which loan options best suit you and your individual circumstances.
Get assistance when you need it: There’s plenty of research showing that people who draw on expert advice are less financially stressed and make better decisions. Use reputable sources such as your financial institution, government resources, and trusted third-party comparison websites.
Don’t hesitate to contact your bank or talk to your broker for specialised help. In cases where it’s needed, most banks will have dedicated financial wellbeing support available for customers.
