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Mortgage holders turn to interest-only loans amid financial pressures


One in five Australian mortgage holders have switched to interest-only payments in the past two years, new research reveals.

A survey by comparison site Finder found that 21% of mortgage holders have moved to interest-only loans since 2022.

This equates to approximately 693,000 people making the change to pay the minimum on their home loans.

The study, which surveyed 1,062 respondents including 346 mortgage holders, also found that 6% of borrowers – or about 198,000 people – are currently making interest-only payments to avoid falling behind on their mortgages.

Richard Whitten, home loans expert at Finder, said many Australian households are in “survival mode”.

“Such a large portion of people’s earnings are allocated to their mortgage and spare cash has been extinguished,” Whitten said.

“A growing number of Aussies are struggling to make their mortgage payments due to cost of living pressures and can’t continue on the path they’re on.”


The research comes as mortgage defaults have been rising in recent years.

Finder’s analysis of Australian Prudential Regulation Authority data shows $14.6 billion worth of home loans were 30-89 days past due in March 2024, up 65% from $8.8 billion in December 2022.

Overdue mortgages have increased each quarter over the past 18 months, now accounting for 0.9% of all outstanding home loan debt, compared to 0.62% in December 2022.

Whitten urged struggling mortgage holders to seek financial hardship assistance from their lenders.

“Banks have a responsibility to support customers experiencing financial stress, so put shame aside and speak up if you are in that position to ease the burden until you can sort out serviceability,” he said.

The home loans expert also advised all borrowers to ensure they have a competitive interest rate.

“You should be looking for an interest rate starting with a ‘5’ or a low ‘6’ – otherwise you’re paying too much,” Whitten said.

He suggested the start of the new financial year is an ideal time for homeowners to conduct a mortgage audit and compare available deals.

Whitten recommended eliminating wasteful spending and destructive debt, ensuring that financial habits and decisions align with future wealth creation goals.

The Finder survey found that while 15% of respondents had gone interest-only at some point in the past two years but have since returned to paying both principal and interest, 79% had not used interest-only payments during this period.

As financial pressures continue to mount for many Australian households, the trend towards interest-only loans highlights the ongoing challenges in the housing market and broader economy.

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