Finder personal finance expert Sarah Megginson.
ANALYSIS
Australians were thought to have largely escaped the dreaded ‘mortgage cliff’ when interest rates rose in 2022 and 2023.
The savings accumulated when rates had been at historic lows in the years prior meant that many borrowers were years ahead on their mortgage repayments and could weather the storm as rates rose 13 times.
Then, we breathed a sigh of relief when rates began to fall again in 2025. It was all over, we’d made it.
In 2026, it’s a different story. Rates have risen twice and look set to be hiked again as inflation gets a second wind and global conflict and uncertainty threatens economies everywhere.
And now, the mortgage cliff is back, looming large once again.
A worrying new report by Finder has revealed 70 per cent of Australians have seen their finances plateau or decline over the past 12 months.
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The survey showed 28 per cent had seen their situation actively deteriorate.
This time around, many borrowers will be without their safety buffers that helped them avoid falling off the previous mortgage cliff.
Finder personal finance expert Sarah Megginson said families have not had a chance to replenish their savings before heading into the current financial storm.
“Whether it’s a sudden rent hike or an emergency dental visit, even a single unplanned expense is enough to tip many households over the edge,” Ms Megginson said. “A renewed surge in inflation brings the very real threat of prolonged high interest rates, or worse, further hikes that could add hundreds to monthly mortgage payments.”
Finder expert Sarah Megginson said households could be quickly tipped over the edge.
The research came hot on the heels of a separate Finder study that revealed 36 per cent of Aussie borrowers struggled to pay their mortgage in March, with 14 per cent admitting to missing at least one payment over the past six months.
Finder head of consumer research Graham Cooke said many of the hurdles borrowers face are out of their control.
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“We are seeing a unique geopolitical squeeze where the cost of living isn’t just about the price of milk anymore. It’s about international events, rising oil prices and potentially dramatically rising interest rates,” Mr Cooke said.
Borrowers can prepare themselves for whatever comes next by looking at what is in their control and being proactive.
Know your number and stress test it
“Check your interest rate against the market leaders using a comparison site,” Mr Cooke said. “If your rate doesn’t start with a five, you’re overpaying.”
Once you’ve taken stock, Canstar data insights director Sally Tindall suggests running your own economic stress test.
“Don’t wait for the RBA to hike rates again. Work out what your monthly repayments would rise to if there were another four cash rate hikes,” Ms Tindall said. “For someone on a rate of 6 per cent today, that’s stress-testing your mortgage at 7 per cent. While that level of rate pressure is, at this stage, unlikely, checking you can withstand this type of extreme scenario will give you comfort over what is likely to be a tough 12 to 18 months.”
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Canstar Data Insights director Sally Tindall said to factor in another four rate hikes.
Put your offset to work
“In a high-rate environment, an offset account is key, because every dollar in it is a dollar less you get charged interest on; something the banks calculate every single day,” Ms Tindall said. “If you can, put your salary straight into your offset … it essentially gives you a tax-free savings that’s equivalent to your mortgage rate, but also serves as an emergency fund. Just make sure you’re not paying a higher interest rate or excessive fees for the privilege of having the account because there are plenty of banks offering an offset on their lowest variable rate loan.”
Put your bank on notice, then leave
It’s likely there are better deals out there, so be familiar with them, Mr Cooke said.
“Call your bank. Tell them you’ve seen a better rate elsewhere and ask for a discharge form,” he said. “This often triggers a transfer to the retention team who have the power to slash your rate on the spot. Even a 0.25 per cent reduction offsets the last cash rate hike.”
If the bank won’t budge, you’ll need to take action.
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“Banks (are) still reserving their sharpest rates for new customers, so consider turning yourself into one by moving to a different lender,” Ms Tindall said. “Factor in switch fees and give your existing bank time to make a counter offer.
“Don’t reward them unless the numbers stack up in your favour.”
Mr Cooke said the lowest rates are a good place to start when looking to refinance.
“But make sure the (new) loan has an offset account,” he said.
Finder head of consumer research Graham Cooke said to make sure a new loan had an offset account.
Build up your own war chest
“If you negotiated a lower rate, don’t lower your repayments. Keep them at the old, higher level,” Mr Cooke said. “This forced extra repayment eats into the principal faster and builds a buffer for the next global shock.”
Ms Tindall said it was also time to account for job insecurity.
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“Unemployment (is) expected to rise,” she said. “If someone in your household is without work for a decent period of time, an emergency fund is essential. ASIC recommends at least three months of expenses, but if you can, go for more.”
Ditch your bad debts
“Mortgages are cheap compared to credit cards, which are often 20 per cent plus (interest payments), or Buy Now Pay Later fees,” Mr Cooke said. “If you have equity, consider a one-off consolidation to roll high-interest personal debt into your home loan, but only if you commit to paying it off at the same aggressive speed. Ditch any credit cards that are costing you interest, and move to a 0 per cent balance transfer alternative.”
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