Majority of female homeowners fearful they couldn't handle small interest rate rise, survey finds

More than two-thirds of female homeowners with a mortgage feel they would be in hot water if their home loan repayments increased by just $100 a month, new data shows.

Of all homeowners, it was women who felt most vulnerable to the possibility of an interest rate rise, with 67 per cent admitting they didn’t think they could afford a hike of more than $23 a week.

By comparison, 48 per cent of men felt they would be unable to cope with such a rise, according to a nation-wide survey conducted by finder.com.au last month.

“Having so many women admit that even a $100 hike could see them a breaking point is a bit of a concern,” said Finder’s money expert Bessie Hassan.

While Ms Hassan said women tended to be more risk-averse when it came to household budgets, they also had lower earning potential due to the gender pay gap and needed to take breaks from the workforce.

Shelter NSW chief executive Karen Walsh said while the higher figure for women was concerning, it was not surprising.

“Women, especially single women, find themselves in a more precarious position when it comes to housing,” she said.

“The continuing maintenance of any mortgage will depend on their earning capacity which we know is significantly reduced as a result of breaks in their working life to have and care for children and their ongoing responsibility to juggle motherhood with a career,” Ms Walsh said.

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An average standard variable rate of 5.06 per cent – an interest rate rise of just half a percentage point that would cost mortgage holders an extra $120 per month based on the national average mortgage size of $388,100 – could push 67 per cent of female borrowers over the edge.

Overall 55 per cent of 632 borrowers surveyed felt they would be unable to handle a $100 increase, slightly up on the 54 per cent of people who felt unable when the survey was last conducted in November.

Only 30 per cent of homeowners felt they could handle a monthly increase of $500 more, while only 17 per cent had a “decent amount of wiggle room” and could afford a jump of $1,000 or more.

“These figures are an early indicator of mortgage stress with flat wage growth and rising living costs adding to the burden,” Ms Hassan said.

Figures released on Wednesday by Digital Finance Analytics found more than 966,000 households nationwide – or about 30.2 per cent of owner occupied-borrowing households – were estimated to be in mortgage stress in May. Up from 963,000 households the previous month.

More than 56,700 households were also estimated to be at risk of a 30-day default in the next 12 months.

“Mortgage and rental stress data is telling us that hundreds of thousands of households are currently living on a knife-edge,” Ms Walsh said. “If interest rates or rents rise their household budgets will not cope.”

Ms Walsh feared overstretched borrowers could have to make cut backs on other essential items or services to meet increased repayments, or be pushed back into the already tight and unaffordable rental market.

The finder.com.au survey found borrowers in Western Australia, which has the highest level of mortgage stress according to census data, felt most vulnerable to a rate rise with 59 per cent saying they would struggle to pay an extra $100.

However confidence in Western Australia had improved slightly and homeowners in South Australia and Queensland had also become more confident.

Meanwhile borrowers in New South Wales and Victoria were more pessimistic, which economist Stephen Koukoulas from Market Economics attributed to “the wealth effect”.

With the Sydney property market, and to a lesser extent the Melbourne market, cooling after years of growth, Mr Koukoulas said homeowners could feel like they were in a weaker financial position.

“People think they have less to spend, because their house is worth less,” he said.

Mr Koukoulas was dubious about the survey and said people often underestimated their ability to meet increased repayments.

While Australia has some of the highest household debt levels in the world, Mr Koukoulas said debt servicing costs had been very low in recent years, enabling borrowers to build a buffer by getting ahead on their mortgage repayments.

He added banks were obligated to ensure homeowners could meet higher repayments and that when the Reserve Bank next increased the interest rate, it would do so in a measured way as to prevent people defaulting on loans.