A recent study reveals that millions of Australians are considering extending their home loan terms to reduce monthly repayments. According to a Finder survey, nearly 30% of Australians—equivalent to 6.2 million people—are open to opting for a 40-year mortgage to ease financial strain.
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Rising Costs and Housing Affordability
As living expenses continue to rise, many homeowners are struggling to balance mortgage repayments with everyday costs. Over the past five years, the average home loan has surged by 37%, making homeownership increasingly unaffordable. Graham Cooke, head of consumer research at Finder, noted that while a 40-year mortgage can provide temporary relief, it significantly increases long-term costs.
Financial Impact of a 40-Year Mortgage
Finder’s analysis indicates that extending a typical $642,000 loan from 30 to 40 years could lower monthly payments by around $300. However, borrowers would end up paying an additional $316,000 in interest over the loan’s lifetime. Despite the short-term affordability, the overall cost could be significantly higher.
Limited Availability and Policy Changes
Currently, only four lenders in Australia offer 40-year mortgages, with three of them catering specifically to first-time homebuyers. The study comes after the Reserve Bank of Australia recently reduced interest rates for the first time since 2020, responding to a decline in post-pandemic inflation.
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Experts caution that while a longer mortgage term may help buyers enter the housing market, it could lead to substantial financial burdens in the long run. Meanwhile, the government continues to monitor inflation trends and lending policies, ensuring that monetary adjustments do not negatively impact the economy.
For homeowners, the key takeaway is to weigh short-term affordability against long-term financial commitments when considering extended mortgage terms.