Holidays on hold if interest rates rise
A FUTURE interest rate rise would throw a spanner in the holiday plans of many home owners, with about half admitting they would be forced to reconsider their spending in the upcoming silly season.
As households digest last month’s surprise rate rises by several major banks, research by online travel insurance company InsureandGo has found that 47 per cent would change holiday plans if mortgage rates rose again by 0.25 per cent, and 53 per cent would change if rates rose by 0.5 per cent. Many would change to a cheaper trip and 16 per cent would cancel their holiday completely, the survey of 1000 Australian mortgage holders found.
InsureandGo spokesman Raphael Bandeira said while Australians loved to travel, rate rises could add significant strain to a household budget.
“People will be impacted differently by the macro environment and what (rate) changes mean to them,” he said.
Mr Bandeira added that age demographics played a role in people’s responses, with older mortgage holders less likely to be impacted by rate rises.
“They are likely to be at the end of their mortgage life cycles.
“Therefore this demographic is less likely to cancel their travel plans.”
People could also look to save on the travel itself, Mr Bandeira said.
“Travellers can find vouchers for accommodation and activities from websites that offer last-minute deals,” he said. “Rather than dining out on a main tourist strip, ask the locals for some hidden gems a few streets back that will be much more affordable.”
He said it was important to consider the impact of currency changes and to research ways to access foreign currency more cheaply when visiting overseas destinations.
Mr Bandeira said tourists should be mindful of certain hidden money traps, such as doubling up unnecessarily on rental car insurance that may already be included in your travel policy.
“A common trap is failing to define your travel budget and stick to it,” he said. “This requires discipline.”
Future rate rises should be expected by borrowers, according to Mortgage Choice CEO Susan Mitchell.
“Mortgage rates are on the rise and in the last month, three of the four major banks announced rate increases on their suite of variable rate loan products,” she said.
PARADISE POSTPONED: