Payments from the Australian government’s JobKeeper subsidy are being slashed from today, and are scheduled to disappear altogether at the end of March. This could see pay packets shrinking for some Australians, affecting their ability to apply for new loans or make the repayments of existing loans.
From 4 January 2021, JobKeeper payment rates for eligible businesses have been reduced by up to $100 per week, as per the Australian Taxation Office:
Tier 1 rate
Tier 2 rate
|28 September 2020 – 3 January 2021||$1,200||$750|
|4 January 2021 – 28 March 2021||$1,000||$650|
JobKeeper payments were last reduced in September 2020, and at the end of March 2021, these payments are scheduled to be cut altogether.
Federal Treasurer, Josh Frydenberg, said at the end of November 2020 that fewer businesses and employees were qualifying for the JobKeeper subsidy, indicating that Australia’s economic recovery was “well underway.” However, recent COVID-19 outbreaks, such as those seen in parts of Sydney, could potentially affect this recovery, leaving some Australians financially vulnerable.
If your pay packet is shrinking from today, and could potentially shrink further when JobKeeper is removed altogether, there are a few options to consider if you’re interested in relieving some financial pressure. For example, negotiating or refinancing your home loan to a lower interest rate, and switching your credit card and phone plan could potentially save you up to $4000.
While most of the mortgage freezes offered back at the start of the pandemic have since expired, it may still be possible to pause your mortgage payments, or switch to interest-only payments for a limited time. Keep in mind that while this could provide some relief in the short term, your loan could ultimately cost more in the long term, thanks to capitalised interest charges. Consider contacting your bank if you find yourself at risk of financial hardship.
If you’re looking at applying for a home loan, a reduction to your income will almost certainly affect your overall borrowing power. Consider contacting a broker for more information on the exact effect that the reduction and eventual cancellation of Jobkeeper payments could have on your mortgage application.