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Thousands of home loan borrowers are as little as one interest rate hike away from defaulting on their mortgage, according to new research.

One in ten Australian home owners have admitted they would not be able to pay an extra $100 a month on their mortgage, while nearly half of mortgage holders said they would struggle to find this much extra a month.

A single 25 basis point rate hike from the RBA translates to an extra $98 a month for the average big four bank borrower with a $650,000 mortgage.

The survey, released today by comparison site RateCity.com.au also found that millions of borrowers don’t have a substantial buffer on their mortgage, if their circumstances were to change.

According to the survey, one in three said they could cover up to three-month’s repayments if relying on their savings alone, while one in seven borrowers would immediately default within the first month.

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Australia’s household debt to disposable income ratio is the real thorn in the RBA’s side, as it continues to hit repeated record highs, clocking in at 190.5% in the most recent quarter.

“Australia’s extraordinarily high levels of household debt has got the RBA in a stranglehold”, said Sally Tindall, research director at RateCity.com.au.

“The RBA would like to put up the cash rate at some point in the next year, but if they did, there’s a real chance thousands of households would default on their mortgage,” she said.

“Banks are in a tough position”, said Dr Andrew Wilson, Chief Economist with My Housing Market.

“They can’t raise rates too much because if they do the Reserve Bank will have to act, because this will certainly take money out of people’s pockets, said Wilson

Founder and CEO of HashChing, Mandeep Sodhi believes that banks take advantage of Australians’ “set and forget” mentality by increasing rates for existing customers while lowering rates for new ones.

“Instead of regularly checking whether they can refinance to avail themselves of a better interest rate, they’re making substantial sacrifices to their lifestyle to offset their monthly mortgage payments,” he said.

“It’s time for mortgage holders to proactively look for ways to curb their monthly payments, and a great solution is refinancing.

“If mortgage holders refinance to a lower rate and put this extra cash towards paying higher repayments, it might give them the breathing space they need for when the RBA does eventually lift rates.”

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