As many Australian homeowners ready to face the rate rise, mortgage stress remains a key issue.
Figures released last year by the Real Estate Institute of Australia (REIA) showed record levels of mortgage stress. On average, families across Australia were paying 38.9 percent of their income in mortgage repayments. Those paying more than 30 percent of their income are considered to be in mortgage stress.
While the recent rate cuts have relieved some homeowners temporarily, many Australians are still struggling, and many too are looking towards the near future, when banks and the RBA are predicting 3 possible rate rises.
So what can you do to relieve mortgage stress?
- Look at your current loan and consider refinancing. Your mortgage may offer features like redraw that you don’t use. You could switch to a product that doesn’t have these features and cost you less. Go shopping: after the recent interest rate cuts, there might be offers on the market that suit your situation better. Be aware that there could be costs involved in switching your loan, so you need to check these out.
- Fixing interest rates is an option for those who want to have certainty of their payments, especially as rates are soon expected to rise. However, if rates do stay low or drop even lower, you risk missing out on the drop. You could also consider fixing part of your loan, so that you can make additional repayments without penalty on the variable part.
- If you are having serious issues with meeting your loan repayments then you should talk to your lender, there may be options around changing the repayment plan or lowering repayments. It’s much better to proactively deal with the situation, instead of ignoring it and potentially risk defaulting on your mortgage and ultimately losing your home.