Around two in five Australians fail to consider the impact of the Reserve Bank of Australia (RBA)'s cash-rate changes to their mortgages.
A recently-published report by Deloitte Access Economics found that 41% of Australians lack an understanding of the relevance of RBA’s cash rate, resulting in a disinterest in monitoring its changes and potential impacts on mortgages.
The central bank has left the official cash rate untouched at 1.5% for over two years now. RBA Governor Philip Lowe said the low interest rate continues to support the Australian economy. However, a problem arises if the current interest-rate environment spurs indifference towards the cash rate in the long term.
“[I]n the current low-interest-rate environment, people could probably be forgiven for somewhat underestimating the importance of the cash rate," the report said, as quoted by Nestegg.com.au.
The report also revealed that 68% of Australians with mortgages have not stress-tested their home loans.
"This is a particular worry when recent estimates show that a 0.5% increase from current interest rates would cause mortgage stress to jump from one in four mortgaged households to one in three – a 2% increase throws half of all mortgaged households into stress," the report said.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan