One in 10 struggling to make mortgage repayments

One in 10 struggling to make mortgage repayments

The number of people struggling to repay their mortgage has more than doubled since the early days of the pandemic, data from the nation’s statistical agency reveals.

About 11 per cent of people struggled to repay their mortgage in October, according to a survey of 1500 people by the Australian Bureau of Statistics (ABS), representing an increase of 6 per cent since June.

The rising mortgage stress was owed to relief measures coming to an end combined with high rates of unemployment, Martin North said, principal of Digital Finance Analytics, a research, analysis and consulting firm.

“Despite the return to work as the lock down is eased, the reduction in JobSeeker, JobKeeper and the need to renew mortgage payments are all offsetting the better job news,” he said.

“We are still in the foothills of the financial crisis, and as stimulus is withdrawn further and unemployment continues to rise, stress will deteriorate.”

About 14 per cent of people deferred their mortgage repayments, the Household Impact of COVID-19 survey found, while 5 per cent had to have a bill or rate payment deferred or reduced.

The findings come as loan deferrals for approximately 900,000 homes and businesses come to an end, and as the number of people late on their mortgage repayments has increased.

Most people are likely to recover. Most.

The Australian Banking Association (ABA), the group advocating the interests of the banking industry, revealed repayments have resumed on 600,000 deferred loans.

“This is an encouraging sign that most Australians are through the worst”, Anna Bligh said, chief executive of the ABA.

“... The good news is that the majority are now bouncing back as they restart their loan repayments.”

Banks remain in contact with the remaining 300,000 mortgage holders to help them evaluate their options, including the 145,000 who have deferred their home loans.

These options include extending mortgage deferrals until 31 March, and lowering mortgage repayments by either converting them to interest-only loans, or by stretching the loan over a longer term.

Another option includes people selling their homes.

“Don’t wait till you are in over your head, talk to your bank, they’ll help you find a way through this,” Ms Bligh said.

“Don’t tough it out on your own.”

Some people are having a harder time than others

The recovery has been described as “uneven” and “bumpy” by Reserve Bank of Australia (RBA) Governor Philip Lowe, as the financial brunt of the pandemic is impacting some people more than others.

And the task of getting everyone back on track financially is likely to get harder over time.

About 10 per cent of people faced problems getting a job in October, the ABS Household Impact survey found, an increase of 4 per cent since June.

Since the pandemic struck in March, there’s still about 428,100 people who have not regained employment since losing their jobs, according to September figures from the ABS.

The nation’s unemployment rate remains high at 6.9 per cent -- above its typical level of 5.5 per cent -- and the RBA forecasts it’ll reach 8 per cent by the end of the year.

Overdue: mortgage delinquencies increase

The number of people who are late on their mortgage repayments by 30 days or more has increased across the country during the pandemic, analysts said.

Delinquencies increased nationally by 0.05 to 1.99 per cent in the year to May 2020, according to Moody’s Investor Service.

“Mortgage delinquency rates increased in 40 Australian regions over the year to May and fell in 47 regions,” the analysts said.

“Over the next year, mortgage delinquency risks will be high in regions with large economic and labour market dependence on industries such as tourism, hospitality and retail, which have been hit hard by coronavirus disruptions.”

Three states anchored the nation’s performance with generally rising delinquency rates.

About 0.29 per cent more people were 30 days or more late on their mortgage repayments in the Northern Territory, pushing it to 2.71 per cent -- the largest increase across the country.

Victoria’s delinquency rate increased by 0.20 to 1.85 per cent -- its highest level since 2005. Meanwhile, New South Wales’ increase of 0.23 pushed its rate to 1.71 per cent -- a high not seen since 2013.

Others are benefitting from relief measures

There is a divide between the people struggling and the people coping financially during the COVID-19 pandemic.

People still employed are enjoying record housing affordability, according to Moody’s Investor Service, as they spend a smaller portion of their pay to service their mortgages.

Two income households were spending 23 per cent of their monthly earnings on mortgage repayments in September, Moody’s said. This was a drop from the ten year average of 26 per cent.

“The affordability of apartments and houses improved in all capital cities over the year to September,” the analysts said.

The increase in housing affordability is largely owed to two factors.

The first has to do with property prices falling for five months straight -- though they stabilised in the most recent month.

While the second concerns the record low cost of servicing mortgages, a byproduct of relief measures introduced to help people endure the financial hardship brought by the COVID-19 pandemic.

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What is mortgage stress?

Mortgage stress is when you don’t have enough income to comfortably meet your monthly mortgage repayments and maintain your lifestyle. Many experts believe that mortgage stress starts when you are spending 30 per cent or more of your pre-tax income on mortgage repayments.

Mortgage stress can lead to people defaulting on their loans which can have serious long term repercussions.

The best way to avoid mortgage stress is to include at least a 2 – 3 per cent buffer in your estimated monthly repayments. If you could still make your monthly repayments comfortably at a rate of up to 8 or 9 per cent then you should be in good position to meet your obligations. If you think that a rate rise would leave you at a risk of defaulting on your loan, consider borrowing less money.

If you do find yourself in mortgage stress, talk to your bank about ways to potentially reduce your mortgage burden. Contacting a financial counsellor can also be a good idea. You can locate a free counselling service in your state by calling the national hotline: 1800 007 007 or visiting www.financialcounsellingaustralia.org.au.

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

How long does Bankwest take to approve home loans?

Full approval for a home loan usually involves a property valuation, which, Bankwest suggests, can take “a week or two”. As a result, getting your home loan approved may take longer. However, you may get full approval within this time if you applied for and received conditional approval, sometimes called a pre-approval, from Bankwest before finalising the home you want to buy.  

Another way of speeding up approvals can be by completing, signing, and submitting your home loan application digitally. Essentially, you give the bank or your mortgage broker a copy of your home’s sale contract and then complete the rest of the steps online. Bankwest has claimed this cuts the approval time to less than four days, although this may only happen if your income and credit history can be verified easily, or if your home’s valuation doesn’t take time.

Can I get a NAB home loan on casual employment?

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

How do I get a pre-approved home loan with Aussie?

Getting Aussie home loan pre-approval means receiving conditional support from Aussie Home Loans to borrow the money you need to buy a home. 

It’s an indication of the approximate amount Aussie may offer you, subject to some terms and conditions. Keep in mind, having a pre-approved home loan does not guarantee an actual approval of your loan when it comes time to buy.

Aussie home loan pre-approval often involves speaking to one of the lender’s brokers. You can make an appointment online. You’ll often have to submit your personal details and other information about your assets, income, liabilities and expenses.  It’s worth remembering that a pre-approved loan is usually valid for a few months.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

What are the NAB term deposit interest rates for businesses?

If you’re looking to lock in a return on your business savings, one option is a business term deposit with NAB. The big four bank provides competitive interest rates while giving you the flexibility to choose the term. NAB offers business term deposit interest rates for investments of between $5,000 to $499,999.

NAB doesn’t charge any monthly account or application fees. The interest is calculated daily and for the 90-day term and six months term, you will get paid when the deposit matures. For the 12 months term, you can either choose to get paid monthly, quarterly, half-yearly or annually. 

If you wish to withdraw your funds before the deposit matures, you need to give NAB 31 days notice. However, they do make exceptions if you’re experiencing hardship and need the funds immediately. Either way, you may have to bear the prepayment cost, which you can learn more about in the Terms and Conditions.

How do I get a Suncorp home loan pre-approval?

Getting home loan pre-approval helps you work out a budget to help you search for a suitable property and make an offer with confidence. Once you put in an application, you should get your pre-approval outcome within two business days. To help get a fast turnaround time of your pre-approval application, ensure all the information and documentation that Suncorp requires. This includes proof of identification, recent payslips, bank account and credit card statements.

You can submit the home loan pre-approval application online. You’ll be asked for information about your income, expenses, assets, and debts. It should take you about 10 minutes to fill out the application, and you can do it free of charge. A Suncorp lending specialist will review your application and contact you within 24 hours or the next working day. Suncorp will not run a credit check until you have heard from this lending specialist.

Once you get Suncorp home loan pre-approval, it’s valid for 90 days. If you don’t find a property you wish to buy in this time you may be able to apply for an extension, speak to your Suncorp lending specialist about this.

What is the average length of a home loan?

Most Aussie lenders offer home loans with a 30-year term, meaning that you should pay back the full loan amount and the interest you owe on the amount in 30 years. 

However, home loans can also have a shorter or longer term. They may be as low as ten years or up to 45 years, depending on the product and lender. 

It’s worth remembering that a longer loan term usually means you’ll end up paying a lot more interest in total, but your scheduled repayments may be more manageable. In contrast, you could opt for a shorter loan term if you are comfortable making large repayments in exchange for paying less interest over the term of the loan.

Where can I get all the information about an ANZ first home buyer’s loan?

As a first home buyer, you may require help and hand-holding, and as such ANZ has the buying your first home section on its website full of important information. ANZ also has a form in this section you can fill out to get a free consultation from an ANZ First Home Coach and create your own plan for buying your first home. This coach will help you understand where your current income is being spent and plan for your home loan repayments. You’ll get a clear picture of the costs involved in purchasing a property and how to budget or save for these costs. The coach will help you understand different deposit options and manage your accounts to enhance your savings.

There are three types of ANZ first home loans - Standard Variable, Fixed, and Equity Manager. The features, interest rates, and terms for each are different, and you can compare them here.

When they apply for an ANZ home loan, first home buyers can also get guidance on applying for the First Home Owner Grant (FHOG). This is a one-off government grant that may be available to you when you’re buying your first home. The eligibility criteria for FHOG differs between the different states and territories, which is why it’s helpful to have expert advice when applying.

What percentage of income should my mortgage repayments be?

As a general rule, mortgage repayments should be less than 30 per cent of your pre-tax income to avoid falling into mortgage stress. When mortgage repayments exceed this amount it becomes hard to budget for other living expenses and your lifestyle quality may be diminished.

How do you qualify for a CBA home loan with casual employment?

Qualifying for a home loan without a full-time job may be challenging, but it can be done. The first step is to understand how a CBA home loan is assessed when you have casual employment.

Most lenders will assess your expenses and savings while checking your loan eligibility, checking on factors crucial to home loan approval, such as if your bills are paid on time and what your credit score presently looks like. 

Your income can be one of the most critical factors to determine your final approved home loan amount. As such, you’ll need to provide payslip copies to lenders to assist them in assessing your income during the loan tenure, regardless of your employment status, full-time, part-time, or otherwise.

Casual employees will want to be casually employed for at least 12 months to be eligible for a home loan. Alternatively, you want to have worked as a permanent casual worker (working for a fixed number of hours per week) for at least one month, or you should have been in your current job for a minimum of three months (if the hours are irregular) to be eligible for the loan.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.