Survey finds Australian borrowers could not make home loan repayments if they fell seriously ill.
A survey of 1000 Australian adults commissioned by ALI Group- a provider of loan protection products- found that 46 per cent of people feared mortgage stress or potential default as a result of a serious diagnosis in the future. One in five ranked a serious illness as their number one concern. The hiking of variable rates by major banks independently of the RBA in recent weeks had further unsettled their nerves.
“The reality is that many Australians are living pay cheque to pay cheque, which is echoed in this research,” ALI Group CEO Huy Truong said. “With high mortgage levels, homebuyers need to be aware of their financial vulnerability.”
Cancer was the illness most feared for 35 percent of women and 31 percent of men. Northern Territory respondents were the most fearful of cancer at 45 percent, while Western Australia and New South Wales were both next at 38 percent. At the other end of the scale, the ACT (24 per cent) was least worried about cancer, while Queenslanders (25 per cent) and Tasmanians (26 percent) were next. South Australians (35 per cent) and Victorians (31 percent) were in the middle.
“Australians seem less concerned about a heart attack, despite one Australian suffering a heart attack every 10 minutes,” Mr. Truong said. “We are surviving cancer more because of early detection and treatment, and we should be able to focus on recovering, not adding unnecessary stress to our bodies by worrying about losing our homes.”
Buoyant real estate markets in a number of Australian cities — especially Sydney and Melbourne — have contributed to heightened stress around mortgages with some buyers stretching the budget significantly to get a foot in the door and resorting to desperate measures like taking out interest only home loans, hoping for some breathing space.
The problem is being taken seriously by the Australian Prudential Regulation Authority (APRA), which recently advised lenders to cap interest only lending to 30 percent of new residential mortgages.
“APRA intervenes when they start feeling uncomfortable with the lending market,” Mr. Peteh said. “Borrowers need to be smart about where they source their home loan from.”
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