Almost three million Australians are struggling to pay their mortgage and rent, latest research figures have revealed.
Younger Australians are struggling the most and asking for rent reduction or a pause in their mortgage repayments, according to research by comparison website, Finder.
One in four young Australians are looking for ways to cut their housing costs, compared to 10 per cent of Generation X and only 1 per cent of baby boomers who are planning to approach their landlords and finance institution for help.
Finder’s survey is based on 1023 respondents which showed that 15 per cent – equivalent to 2.9 million Australians – are asking for a rent reduction or pause in their mortgage repayments.
“If you have a home loan, a pause in your mortgage payments should be your last resort,” warned Kate Browne, personal finance expert at Finder.
A mortgage pause would mean you have to repay the money later plus an increase in interest and potentially extend the length of the loan.
Finder research found that 10 years on a $500,000 loan at an average variable rate of 3.9 per cent, would cost an extra $11,127 over the remaining 20 years of the loan, if you paused repayments for six months.
On a $400,000 home loan size with an average variable rate of 3.9 per cent, would mean you would pay an extra $8902 over the remaining 20 years of the loan.
“We would recommend looking into getting a better rate on your home loan first if you are struggling to make your repayments. While a mortgage deferral or holiday sounds appealing in the short term, you need to seriously consider whether you’ll be able to afford this “holiday’ in the long run,” said Ms Browne.
“Refinancing your mortgage could save you enough to avoid having to pause your payments. COVID-19 has hit the economy hard but the silver lining is that home loan interest rates have never been lower.
“If your interest rate doesn’t have a two in front of it, you need to start shopping around. There are hundreds of dollars to be saved simply by switching,” she recommended.
During this time of economic uncertainty, she suggested that Australians should look for ways to cut down on their expenses and make sure they are getting the best deal on everything – from groceries to their home loan interest rate.