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According to a Money.com.au study, interest paid to banks climbed 20 per cent over the last 12 months, with payments increasing by $4.8 billion.
In the September quarter, a total of $30 billion was paid in interest on home loans, the size of some countries’ GDP.
“Homeowners are being hit with a perfect storm – interest rates at a 13-year high, skyrocketing property prices forcing buyers into larger mortgages, and more borrowers entering the market. As a result, homeowners are collectively paying record amounts of interest to banks,” said Money.com.au”s research and data expert, Peter Drennan.
The data also revealed that 67 per cent of scheduled home loan repayments now go toward interest. For investor loans, it was 72 per cent.
Further, monthly repayments on a $600,000 mortgage over 30 years have risen by $105 in the past year due to an average variable interest rate increase from 6 per cent to 6.27 per cent.
Money.com.au’s home loans expert, Mansour Soltani, said that these increases are taking a toll on the day-to-day lives of home owners.
“Australians are making significant sacrifices, cutting back on dining out, vacations, and everyday luxuries to stay on top of their mortgage commitments. At the same time, many borrowers are prioritising debt reduction, and that includes selling underperforming assets or downsizing to pay off their primary residence more quickly,” he said.
Despite the squeeze, there is an increase in those opting to make extra repayments. On average, people are paying an extra 24 per cent on top of scheduled loan repayments compared to the same time last year.
If this was translated to a mortgage of $600,000, it equates to an added $877 per month, on top of scheduled payments. At the same time last year, this figure stood at 16 per cent or an extra $566 each month.
Across the board, the excess payments reached $10.6 billion throughout the quarter, up from $6.8 billion last year.
Related: Mortgage repayments a financial priority for consumers
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