Almost two out of three Australian homeowners allocate 40 per cent of their weekly household income to paying their mortgage, according to research commissioned by Aussie.
And another 19.5 per cent of Australians devote more than half of their take-home income to their home loan.
Based on the Australian Parliamentary Library definition of “mortgage stress”, it refers to a situation where homebuyers are paying more than 35 per cent of their income on home loan repayments.
The basis for the above definition of mortgage stress is the general rule that financial institutions will not allow a household to take out a housing loan if the monthly home loan repayment, calculated over a 25 year term, exceeds one-third of monthly household income.
However, not all households paying 35 per cent or more of their income in loan repayments are necessarily experiencing stress. Indeed, some homebuyers, especially those on higher incomes, may be voluntarily paying more than 35 per cent.
According to Aussie’s research¹, which was conducted online by consumer insights firm Brandmanagement, one-third of the survey respondents define themselves as being under “mortgage stress”.
The research, however, did raise a few tips for others who find themselves under pressure to make their mortgage repayments.
- Cut down on luxuries such as dining out and takeaways
- Buy in bulk and share with friends and family
- Stop smoking
- Think twice about that coffee. A $3 coffee per day adds up to $1095 in one year
- Don’t buy “bargains” of a lesser quality – it is a false economy – save up and buy quality
- Always pay more than the minimum requirement. If you can’t then you’ve borrowed too much to start with
- Budget before you borrow. Always estimate interest rates to be at least 3 per cent higher and give yourself funds to play with.