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Struggling with your mortgage? You’re not alone

Struggling with your mortgage? You’re not alone

Despite a record low official interest rate, almost a third of all Australian property owners are struggling to make mortgage repayments, new data from research firm Digital Financial Analytics (DFA) shows.

That’s about 1,080,000 households who experience mortgage stress, which is when a homeowner forks out more than 30 per cent of their income to repay their home loan. And more than 70,000 borrowers won’t be able to make their debt repayments in the next 12 months, according to DFA’s research.

Mortgage stress is reportedly affecting Australian homeowners in a big way, with suburbs across the country dealing with the dilemma. The top 21 suburbs across Australia in mortgage stress are: 

  • NSW - Chipping Norton, Leumeah, Mount Annan, Bidwill and Dean Park 
  • VIC - Narre Warren South, Berwick, Pakenham, Ballarat East, Sydenham, Frankston, Derrimut and Roxburgh Park 
  • QLD - Harristown, Camp Hill and Geebung 
  • WA - Tapping, Merriwa, Innaloo and Success 
  • SA - Paralowie 

While it might be easy to assume that these are all low-income earners or first-home buyers, this may not be the case.

Homeowners can fall into mortgage stress when someone has managed to get their foot in the door to the property market with a smaller deposit, though they may subsequently owe a larger than average amount to their lender. With the housing market coming off the boil in the past year, the property could potentially be worth less than what the owner paid in a white-hot market.

Dominique Grubisa, founder of property advice organisation DG Institute, added that the surging cost of living has contributed to the rise of mortgage stress, including things like petrol prices, healthcare costs and school fees.

“Mortgage stress is a nationwide crisis and right now it’s the highest it has been in many years,” she said.

“Australians need to be conscious of their spending and how they can manage their finance to be sustainable for the long term.”

Low wages growth is also ramping up the pressure for homeowners, and it will take years for the wage growth slowdown to rectify.

If you’re worried about whether you’re a victim of mortgage stress, it could be a good idea to do a quick test with RateCity’s mortgage stress calculator, which classifies your situation into three “zones”: stress free, stress danger and mortgage stress.

You can use this information to get a clearer idea of how you stand and think ahead to combat potential or real mortgage stress.

Whether you’re struggling with your home loan or paying it off comfortably, here are some tips to think about if you have a mortgage:

  1. Negotiate with your current lender. The RBA cut rates to a historical low of 0.75 per cent this week. But is your lender passing the savings on? Check your lender’s website or ask around to see what they’re offering new customers. Chances are it might be lower than yours. Why not call them up and have a chat?
  2. Switch to a lower rate lender. With such low rates, it could be a good time to shop around for a lender offering a more competitive rate. To make a more informed choice, consider using RateCity’s refinance calculator to see if switching loan options would be worth it for you.
  3. Ask for a “hardship variation”. Grubisa advised borrowers in genuine financial stress to ask their lender to vary the loan for hardship, which effectively rearranges the repayment terms. For example, you may be able to freeze repayments for a period of time, pay a lower interest rate for a period of time or extend the term of the loan.

Lowest variable rates on RateCity database

LenderRate
Reduce Home Loans2.69%
Homestar Finance2.74%
G&C Mutual Bank2.79%
Athena Home Loans2.84%
Mortgage House (not available to NSW customers)2.89%
Well Home Loans2.97%
Tic Toc2.99%

*Based on a $300,000 loan on a 30-year term, as of October 2, 2019. Table has been changed to reflect updated rates.

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This article was reviewed by Head of Content Leigh Stark before it was published as part of RateCity's Fact Check process.

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