How to Avoid Mortgage Stress

Australians are more worried than ever about not being able to repay their mortgages. (Source: Getty)

Australian mortgage holders are feeling worried about their mortgage repayments, with 30% admitting that defaulting on their home loan is a major concern, according to a new study.

The research, conducted by Aussie, found that three in four Australian mortgage holders were unsure of the impact of RBA cash rate hikes on their household budgets, leaving them to seek clarity .

Worryingly, nearly three in 10 Australian mortgage holders (28%) did not think the cash rate would rise at all when budgeting for a home loan, although they would have to factor this into their assessments home loan.

Another four in 10 (38%) only budgeted for the impact of a cash rate of 3% or less.

“With increased cost of living pressures, there is no doubt that this is a stressful time for many Australians, particularly mortgage holders,” said Karen Sorrenti, director of Australian state brokerage.

“Our latest research shows that nearly one in five (18%) Australians with a mortgage face ‘significant mortgage stress’.

“Furthermore, four in five (81%) confirmed that rising cash rates and rising costs of living are a growing reality, creating unwanted stress for their household.”

Sorrenti said a staggering number of mortgage holders had failed to act or explore other options, such as refinancing.

7 ways to avoid mortgage stress

  1. Stop, look and ask – always know what your current rate is and, if it’s fixed, make sure you know when it ends

  2. If you’ve been avoiding financial literacy, now is the time – it’s the gateway to managing, or avoiding financial distress entirely.

  3. Do some math – be ahead of what you can afford for repayments and how much would put you on the path to financial hardship

  4. Practice a conscious financial approach, paying attention to your complete financial situation

  5. Refinance a home loan with low or no fees

  6. Take advantage of refinance cashback offers

  7. Consider an offset account to reduce the amount you pay in interest on the home loan

The real estate downturn may not be as bad as we think

As the stress of higher interest rates played on homeowners’ minds, so did the housing downturn.

With house prices falling, many who bought during the height of the recent boom are worried about falling property values ​​and negative balance sheets.

Negative equity occurs when someone has paid more for a property than it is worth.

For example, if someone buys a house for $1 million with only a 10% down payment and the value of the property then drops by 20%, then they owe more on the property than they could sell.

However, according to a new report from Domain, the housing market correction may not be as severe as some might imagine.

Based on analysis of four real estate cycles since the early 1990s, Domain’s head of research and economics Nicola Powell said a return to pre-pandemic prices was unlikely. .

A graph showing the total value of the Australian property market since 2011.

The total value of the Australian property market since 2011. (Source: Yahoo)

“When property prices fall, it can understandably make many Australians uncertain about their property journey,” Powell said.

“However, it’s important to remember that real estate has historically had its ups and downs, and there are lessons that can be learned from previous price cycles.”

The Domain report challenges the view that the housing market goes through spectacular boom and bust cycles.

House prices tend to spike, then drop slightly, stagnate or go through a period of moderate growth before rising again.

During the average recovery, house prices rose 32.7% from trough to peak.

In contrast, the average downturn was a 3% drop in house prices from peak to trough.

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