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Date Published : Wednesday, July 23, 2008
Australia's high interest rates have overtaken becoming unemployed as the number one worry for borrowers, a new survey has found.
Higher rates push up the cost of repayments on home loans and other forms of borrowing and, according to the poll by international brokerage Genworth, one quarter of home loan borrowers now believe they will have difficulties meeting repayments within the next 12 months, a report in the Courier Mail said.
This is up from less than 20 per cent of borrowers at the same point in 2007, it added.
The base interest rate is set by the Reserve Bank of Australia, which has increased it four times in the last year, most recently in March.
However, many banks and lenders have pushed their individual rates up beyond the baseline level - and the increases have "significantly hurt" borrowers, the newspaper said.
Some four per cent of those questioned are now classed as being in "severe mortgage stress", which means their home loan repayments account for more than 40 per cent of their income.
Genworth country manager Peter Hall said barring a "defined event" such as becoming unemployed or falling ill, the majority of borrowers would not default on their mortgage.
"However, when borrowers are already stretched to capacity the defined event only has to be small to have serious implications," he added.
More expensive borrowing is also exacerbating Australia's housing affordability problem, the survey found.
Some 46 per cent of people who do not currently own property told the poll they would like to buy a house within the next year - but 85 per cent said they do not have the finances to do so.
Furthermore, "only 23 per cent" of non-homeowners thought now is a good time to enter the property market.
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