New research released today by AMP Bank found 83% of homeowners have built a savings buffer - which covers an extra month’s mortgage repayment - given further rate rises are looming.

More than two thirds (71%) have subsequently made changes to their household budgets, with spending on groceries, entertainment, clothing, holidays, and gifts the first to be reduced.

This is up from 58% in October 2022 - prior to the three most recent cash rate hikes in November, December, and February. 

Aside from cutting back on spending, 54% have found other ways to supplement their cashflow and income to increase their savings buffers, helping improve their sense of financial wellbeing.

New data commissioned by Real Insurance reiterated how Aussies are adapting and reevaluating their spending habits given the current cost of living crisis.

Of the 1,207 survey respondents, 49% are willing to ditch entertainment, socialising, and eating out, while home deliveries (46%) and takeaway coffees (43%) are also being sacrificed. 

To try and save money on food and grocery related costs, 40% of Aussies are using loyalty programs while 51% are bargain hunting for weekly specials.

AMP Group Executive Sean O’Malley said in a period of higher costs of living, it’s no surprise homeowners are finding more creative ways to improve their budgets.

“Steps like reviewing cashflow, setting a budget, and regularly shopping around for a more competitive interest rate offer are practical ways to help reduce financial stress,” Mr O’Malley said.

“Many Australian homeowners will find themselves in a higher interest rate environment as they roll-off fixed home loans in the months ahead.

“If not already, it’s a good idea to talk to your bank or broker to understand your options and get resources and help tailored to your circumstances.”

Of the 1,000 respondents, 69% are worried about meeting their mortgage repayments if interest rates continue to rise. 

This comes as minutes from the latest monetary policy meeting hinted that RBA board members forecast about two to three more rate hikes. 

In front of a senate committee last week, RBA Governor Dr Phillip Lowe said that the board was far from deaf to these concerns.

"We hear the message loud and clearly," Dr Lowe said.

"We talk about at every board meeting how this is really, really hurting some households.

"But we also talk about if we don't get on top of inflation, the pain will be worse."

The consensus amongst major economists is that the cash rate will likely end up above 4%, an increase of 400 basis points since April 2022.

ANZ Senior Economists Adelaide Timbrell and Felicity Emmett said although large savings buffers will help some households manage higher repayments, others will ultimately struggle.

“RBA research in 2022 suggested 15% of indebted households would need to dip into savings to pay their mortgages and other essentials at a cash rate of 3.6%,” Ms Timbrell and Ms Emmett said.

“While income growth forecasts have been upgraded since this analysis, it does suggest that a small portion of households will face stress with a cash rate of 4.1%.”

See Also: New research reveals the top suburbs reporting mortgage stress

Tips for managing financial wellbeing

If you’re in need of a financial clean up, Mr O’Malley recommends the following steps:

  • Find your bearings - Determine where you are financially (spending and income), then create a budget - there are plenty of budget/tracking apps and calculators that are easy to use.
  • Check your home loan is right for you - There are plenty of home loan products on the market with different features. Consider what loan options are right for your individual circumstances.
  • Get assistance when you need it - Contact your lender or broker if you’re struggling to make your mortgage repayments.  

Image by Sincerely Media via Unsplash



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