Time to read : 3 Minutes
After six rate rises, Australian mortgage holders are really starting to feel the pain.
Roy Morgan now says that 1,037,000 of us are now at 'risk' – in other words, our loan repayments have exceeded a safe level and we are now officially in mortgage stress.
😨 Buckle up. The Reserve Bank Governor Phillip Lowe has already said:
"There is no escaping the fact that we are living through a challenging period."
You're not kidding, Phil.
Here's what you need to know about mortgage stress
Times are incredibly tough for just about everyone right now.
The average homeowner on a 600K mortgage will be paying an extra $698 a month right now. And that's if you get a good deal when you come off a low fixed rate.
This doesn't even factor in if you get trapped on a number that starts on anything higher than a 4 – there's no guarantee you'll be able to refinance to a lower rate.
With rates showing no signs of stopping, it probably means more Australians will end up as mortgage prisoners.
Be aware: "mortgage prison" is when homeowners are unable to move to a better deal. This is because lenders assess if you could still repay at a rate that's 3% higher than you're currently on (the serviceability buffer).
What you can do
Stay calm and consider ALL of your options if you are feeling stressed. There's always a way.
Speak to your bank or lender and see how they can support you. Lenders generally don't want to have to take control of a property unless there's no other option.
If you are able to shop around for a better deal – do. Start with a mortgage broker: they've got access to a wide range of lenders and will have a pretty good idea which ones are more likely to be willing to refinance your loan.
Do you sums – MoneySmart recommends looking at your budget, contacting your utility providers for hardship support, paying in instalments and speaking to a free financial counsellor.
The bottom line
Your repayments are going to go up and that is going to be hard on most of us.
And as Phillip Lowe says:
"We live in peace and we enjoy a level of material prosperity that few other people in the world experience. Our economy has bounced back better than most from the COVID-19 disruptions and we are benefiting from a surge in the prices of our key exports.
"And for the first time in almost 50 years, it is possible to say that almost all Australians who want a job can find one. Our public services are of a generally high quality and our public finances are in better shape than those of many other countries. And our natural assets mean that Australia is well positioned for the clean energy transition. We have a lot to be thankful for."
🤞🏾 Let's hope he is right.
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions.
