MEDIA RELEASE
5 September 2023
- Study finds 75% of mortgagors have experienced poorer health and relationships since rate rises.
- 83% of young Australians have been affected.
- 75% won’t trust an RBA interest rate forecast again.
New research suggests that interest rate rises are having such an adverse financial impact across households that they might soon contribute to social issues. The research reveals that rate rises have adversely impacted the personal lives or wellbeing of 75 per cent of Australian mortgage holders. Even with the appointment of a new RBA Governor, 75 per cent of mortgage holders or those living with a mortgage holder say they won’t trust RBA forecasts again.
These findings have been revealed in a new survey of an independent panel of 1000 Australian mortgage holders, or those living with a mortgage holder, by finance platform MNY. The survey asked respondents how rising rates were impacting them personally – or impacting the mortgage holder they were living with – and presented them with a list of 11 impacts. Additionally, respondents were asked if they would trust RBA forecasts again, even with the appointment of a new Governor. The full survey results, including breakdowns across age groups and states, can be found here: https://mny.com.au/impact-of-interest-rates-on-australians/
1 in 2 mortgage holders experiencing heightened stress and anxiety as rates rise
Since May 2022, the cash rate has risen 12 times, with mortgage interest now averaging around 6.5 per cent. This means households with a $500,000 mortgage on a variable rate have seen their repayments increase by $1500 per month in the midst of a cost-of-living crisis.
The survey has given a snapshot into the true impact of consistent interest rate hikes. Specifically, almost one in two (49%) respondents reported heightened stress and anxiety, and 29 per cent mental health issues or sleeplessness. Other areas reported to have been impacted include a poor diet (19%), poor physical health (16%), weight gain (13%) and decreased performance at work (9%).
The data also revealed that 8 per cent of mortgage holders have worse relationships with family and 11 per cent have worse relationships with their partner over the financial impact of rate rises. Only one in four (25%) reported no adverse impacts.
MNY Business Analyst Sabina Khanusiak says: “While borrowers have faced higher interest rates in previous decades, house prices and, consequently, loans were smaller. In 2021, when interest rates were at a record low, more than $305 billion was borrowed to buy or renovate homes in the first 10 months[1]. These borrowers have significant financial strain if they are on, or are about to go on, variable-rate loans.
When we analysed the pool of respondents who were impacted, almost two-thirds (65%) are living with increased stress and anxiety, suggesting that rate rises have given borrowers very little disposable income. It is impacting all areas of their lives and it is becoming a social issue as much as a financial one.”
The mental health and relationships of young Australians at most risk
New data revealed the impacts of rate rises on Australians within different age ranges. A significant proportion (83%) of 18 to 34-year-old borrowers admit that their mental health or relationships have been affected along with heightened stress and anxiety (49%) as a result of rate hikes.
In comparison, 78 per cent of 35-54-year-olds are impacted in some way. More than half (54%) have higher levels of stress and anxiety, followed by 35 per cent experiencing a strain on their mental health, and 33 per cent suffering sleeplessness.
Older age groups revealed that they were least affected by rising rates. The research revealed two-thirds (67%) of over-55s have been impacted, and mostly by heightened levels of stress and anxiety (at 63%).
Sabina says: “The amount of stress that young Australians are facing due to the increase in interest rates is worrying, especially since many of them are new to borrowing. This current economic climate provides no encouragement or reason to buy property, leading to a rental crisis that is causing stress and anxiety for renters alike. These are uncertain times for Australians who are struggling to secure and retain a place to live,” says Sabina.
3 in 4 borrowers say they will not trust the RBA again
In 2021, RBA Governor Phillip Lowe said several times that rates would not rise until 2024. Since then, the RBA has increased the cash rate 12 times – to 4.1 per cent by June 2023 – a record high that was last seen in 2011, when the cash rate peaked at 4.75 per cent[2]. Alongside the data demonstrating the strain these rises have had on mortgagors, MNY found that 75 per cent of these homeowners would not trust RBA forecasts again, even with the appointment of a new Governor.
The data found that older Australians are least likely to place their trust in the RBA, with only 21 per cent indicating they would.
“The RBA has a significant challenge ahead, as keeping interest rates unchanged does not alleviate the financial strain felt by homeowners. Michele Bullock, the RBA’s new Governor, needs to regain the trust of 75 per cent of the mortgagor population and help ease the financial burden that a significant portion is experiencing,” says Sabina.
The full survey results, including breakdowns across age groups and states, can be found here: https://mny.com.au/impact-of-interest-rates-on-australians/
Advice Disclaimer
This article is intended to provide general information only, and not financial advice. Before acting on any information in this article, you should consider your individual and business circumstances, and seek independent and professional legal, financial, taxation or other advice to help you determine whether these actions are appropriate for your needs.
About MNY
MNY (mny.com.au) is the everything-money guide for Australians, destined to help people make smarter decisions around financing by providing a wealth of financial information, research and brokerage services.
[1]https://www.mortgagechoice.com.au/news/more-borrowed-for-housing-than-any-other-year-on-record/#:~:text=According%20to%20the%20ABS%2C%20Australians,other%20year%20on%20ABS%20records.
[2]https://www.rba.gov.au/statistics/cash-rate/#cash-rate-chart
Key Facts:
- 75% of mortgagors have experienced poorer health and relationships since rate rises.
- 83% of young Australians have been affected.
- 75% won’t trust an RBA interest rate forecast again.
Contact details:
Courtney Trewin | 0420 211 251 | [email protected]
Gillian Morgan | 0447 254 662 | [email protected]