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Credit Cards, Mobile Phones Or Mortgages - What Would Aussies Give Up First
A working mobile phone and internet are the most important products for Australian households to keep, even ahead of their mortgage, according to a study from the University of Sydney and credit provider illion.
We’re most likely to default on paying off maxed out credit cards.
The rise of Buy Now Pay Later (BNPL) has opened up another line of credit that’s used by those already in debt.
Be aware: Defaulting on any payments isn’t without its consequences. It can make it harder to get a loan or credit card in the future and can make it harder to get out of debt.
What financial products are we most likely to default on?
The researchers wanted to know what would make a homeowner default on their mortgage and how badly in debt somebody would have to be before they’d make the difficult decision to hand back the keys to their lender.
Unsecured loans, credit cards, and BNPL are much more likely to go unpaid before essentials such as utilities and car loans.
Mobile phones and internet sit at the bottom of the list. Even when times are tough financially, these appear to be the last services we’re willing to part with.
But… if banks are worried about mortgage defaults, they don’t appear to be showing it.
🏠 Back in June Westpac and CommBank told the ABC that fewer than 1% of their mortgage holders were behind in payments.
📈 CommBank’s CEO Matt Comyn has also suggested that this year’s ongoing interest rate rises won’t really bite for homeowners until December.
This ties in with the Reserve Bank’s assessment of our finances earlier in September. They’re concerned that spending on big ticket items is too high as we start to dip into any savings built up during two years of Covid lockdowns.
The bottom line
We should get a picture of what kind of shape Australia is in financially by December –although any action by the Reserve Bank or politicians at that time may come too late for anyone already struggling with debt.
Many people took out ultra-low fixed rate home loans over the past two years and many of these mortgages are soon to expire.
Lending criteria is getting tighter, so home owners and other borrowers could get trapped on a higher interest rate if banks view them as too risky to refinance.
💡TIP: You may be able to consolidate other debts such as car loans or credit cards into your home loan when you refinance your mortgage, which may make repayments a little easier.
