Cost of living: Risk warning as Aussies enter financial survival mode

Australians are going into financial survival mode to keep the roof over their head, but a leading money expert has warned some of the desperate moves could put their fiscal future at risk.

Would you use your credit card to pay the rent or your mortgage?

Australians are going into housing survival mode, using credit cards and even taking out personal loans to pay their rent, mortgage and surging electricity bills.

The cost of living crisis also has homeowners ditching their banks in droves, with three quarters of those who have refinanced in the past year getting a better deal from a new lender in the process.

With housing the biggest single cost for most Aussie households, new research from comparison website Finder has found almost 10 per cent are moving in with a friend or renting out a room in their home to a stranger in order to keep the roof over their head.

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Just as many renters and recent first-home buyers have moved back in with their parents to cope with the cost of living crisis.

Concerningly, another 7 per cent are taking the extreme step of putting housing repayments on their credit card or even using a personal loan to make ends meet.

Finder money expert Rebecca Pike said Australians turning mortgage interest rate into compound debt by signing up to pay for that interest with an even higher rate on a loan or credit card balance was “very concerning”.

“Unfortunately, this is kind of where we are at the moment, people feel like they have no choice,” Ms Pike said.

“And that is a really concerning thing because you get into a debt spiral.”

Housing is a major expense for Australian households at the moment.

With most of the economists surveyed by Finder in separate research now expecting interest rate cuts could be more than a year a way, homeowners needed to be planning how they would survive until 2025.

“If you are starting to struggle, your lender is there to help … there are plans and you can take action,” Ms Pike said.

Finder also found 12 per cent of the 1063 respondents to its survey were cutting back on credit card use in order to cope with rising housing costs, while 14 per cent were stepping back from buy now, pay later purchases.

Alternatively, asking a friend who is worried about how much rent they’re paying for their own place to move in for a year could help both households make it through — with 4 per cent of those surveyed indicating they had done this.

Moving back in with mum and dad is helping some younger Australians get away from rent or even mortgage pain from their first home.

“And 2024 is definitely a year to look at refinancing, or even in the last month of this year,” Ms Pike said.

“If you haven’t looked at your interest rate in the past 12 months, the first thing to do is to call your lender and ask what rate new borrowers are being offered and seeing if yours can be dropped down. But also see what other rates are out there. There’s no point being loyal.”

Finder’s Housing Market Report: Navigating Refinancing in 2023 also found that for those who refinanced their home loan to cope with rate hikes, 75 per cent had swapped lenders in the process — leaving Aussie borrowers “less loyal than they’ve ever been” and thousands of dollars better off.

“The refinance market is on a high right now as banks are appealing to them more than worrying about their own customers,” Ms Pike said.

“So I would hope to see people do something this festive season.

“It’s widely known now that new borrowers can get better rates if they switch lender.”

Mortgage holders who are less loyal tend to get a more balanced interest rate.

While 44 per cent of Australians had asked their lender for a better deal in the past year, and Finder recommending they should be doing so every three months, just 16 per cent hadn’t got one.

The one thing Australians don’t appear to be giving up on is haircuts, with the Australian Hairdressers Council this week confirming they had not seen a decline in custom despite suggestions from Reserve Bank governor Michelle Bullock that haircuts were driving inflation.

AHC chief executive Sandy Chung added that even at their busiest time of year the industry hadn’t increased costs 13 times the way banks had.

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Originally published as Cost of living: Risk warning as Aussies enter financial survival mode