Study shows borrowers reducing debt and expenses to get a mortgage approved
Millions of Australians have made significant changes to their spending and debt habits in an effort to improve their chances of securing or refinancing a home loan, recent research has shown.
A national survey conducted by Finder, involving 1,034 participants, found that 18%—equivalent to approximately 3.9 million people—have taken steps such as reducing personal debt and curbing expenditure over the past five years to meet lender requirements for home loans or refinancing.
Recent data from the Australian Bureau of Statistics, however, indicate that household spending increased slightly in September, following a period of little change in August and a 0.4% rise in July.
“Lenders are scrutinising household spending more than ever, which means everyday purchases – from dining out to digital subscriptions – can be the difference between a loan approval and a rejection,” said Sarah Megginson (pictured right), personal finance expert at Finder.
“Consumers aren’t just cutting back on luxuries; many are reworking their entire financial lives to prove to lenders they’re a safe bet. The fact that so many are cutting back just to refinance reveals how tight the credit environment is. It’s no longer enough to have equity, you need spotless spending habits too.”
The research also indicates that more than one-third (35%) of Australians believe they may never be able to purchase their own home.
Megginson noted that some individuals are delaying significant life decisions, such as starting a family or upgrading their vehicle, in order to maintain or obtain a mortgage. “It’s a stark reminder that home ownership now dictates how, and when, Australians live their lives,” she said.
Megginson therefore advised borrowers to ensure they are securing the most competitive home loan available. “Once you’re ready to buy or refinance, make sure you don’t pay too much for the loan,” she said. “Even half a percent can mean thousands of dollars saved every year.”
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