Tate Mooney and his wife purchased their first home in mid-2022 and said they would have done things differently in hindsight. ·Source: Supplied
An Australian mortgage holder has opened up about the regrets he has over the loan for his $440,000 Gold Coast home. The Reserve Bank of Australia (RBA) has kept interest rates at a high of 4.35 per cent for more than a year, leaving many homeowners wishing they had done things differently to shield themselves from rising costs.
Tate Mooney purchased his first home with his wife in mid-2022 when the official cash rate was rising from its rock bottom of 0.10 per cent, hitting 0.85 per cent in June and 1.35 per cent in July. The nurse told Yahoo Finance the couple decided to purchase the small two-bedroom duplex ahead of their move from regional Victoria to the Gold Coast.
“We were looking at slightly bigger places but we thought we’d better err on side of caution … which is probably a good thing considering interest rates did go up,” Mooney said.
RELATED
The couple were able to secure a no deposit home loan through Commonwealth Bank by getting Mooney’s parents to act as guarantor. The couple took it out as an investor loan and initially rented out the home for six months before relocating to the Gold Coast.
Mooney said his parents guaranteed $110,000 of the home loan by putting up part of their property in Victoria as collateral.
“It was kind of the only option for us if we wanted to move when we did,” Mooney explained.
Are you a mortgage holder struggling with higher rates? Contact [email protected]
Since taking out the loan in mid-2022, the couple have seen their monthly repayments rise from $1,870 to $2,155 per month, and $532 to $653 for the guarantee portion of the loan.
Their home loan interest rate has risen from 4.49 per cent to 6.69 per cent.
While the couple are managing the rising repayments, Mooney said they do wish they had saved up a deposit to give them a bigger financial buffer and had made other tweaks to their loan to save money.
“We do in hindsight wish we fixed the interest rate, considering how much it has gone up,” Mooney told Yahoo Finance.
“We also wish we refinanced a bit earlier because we got locked into a CommBank loan because of the guarantor thing.
“Their interest rates weren’t the best but it was all we could do with the guarantor.”
New research from Your Mortgage found 62 per cent of mortgage holders regretted their home loan choices and would do things differently if they had their time again.
The biggest regret of the 1,049 Aussies surveyed was failing to prepare for interest rate changes at 28 per cent.
The second most common regret was not securing a fixed interest rate (23 per cent), followed closely by not opting for a longer fixed term (21 per cent).
Other borrowers regretted borrowing too much, or having too small of a deposit.
High interest rates mean one in seven borrowers admitted they were going backwards, with their regular expenses outweighing their income.
Another quarter said they were digging into their savings to meet their everyday expenses.
Your Mortgage analyst Brooke Cooper said mortgage holders couldn’t change the past but they could act now to make sure they were getting a good mortgage deal. ·Source: Supplied
With the RBA expected to cut interest rates this year, Your Mortgage analyst Brooke Cooper said now was the time for Aussies to take action.
“If you’ve found yourself drowning in the high tide of interest rates and home loan repayments, you’re not alone and you’re not trapped – it’s possible to save yourself,” Cooper said.
“There is no turning back the clock, but borrowers who are unhappy with their mortgage should consider if refinancing could improve their financial outlook.”
For those who are unable to refinance their mortgage, Cooper said it can be worthwhile reaching out to your lender to see if you can negotiate a better rate or added features.
“Banks and lenders are businesses and, if you’ve been a good borrower, you likely command more power than you expect,” she said.
Commonwealth Bank: First cut in February 2025, with four cuts to bring cash rate to 3.35 per cent by end of 2025
Westpac: First cut in February 2025, with four cuts to bring cash rate to 3.35 per cent by end of 2025
NAB: First cut in February 2025, with five cuts to bring cash rate to 3.10 per cent by February 2026
ANZ: First cut in February 2025, with two cuts to bring cash rate to 3.85 per cent by end of 2025
All of the Big Four banks are now expecting the RBA will cut interest rates at its meeting this month.
One 0.25 per cent interest rate cut would translate to a $92 monthly drop in home loan repayments for someone with a $600,000 loan with 25 years remaining, according to Canstar calculations.
Mooney said he was looking forward to the RBA cutting interest rates and “every little bit would help”.
Since the RBA rate hikes, Mooney said the couple had to be stricter with their budgeting and had less to spend on discretionary things like going to the pub or small getaways.
“We’ve just had to budget a lot harder. We do a money jar system where you put money in different accounts for different things,” he said.
“We don’t do as many adventurous things as we used to before we bought a house. It’s a bit more hanging out at home kind of thing.”
A Yahoo Finance live blog will bring you expert predictions and commentary as the RBA decides the cash rate on Tuesday, February 18.
