Unpacking Mortgage Stress

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Sydney, August 23: New research from Aussie has revealed a significant number of Australian mortgage holders are waiting, watching and hurtling towards mortgage anxiety – with 30 per cent admitting the troubling truth that avoiding a default on their home loan is now a major consideration.
The research, conducted by Aussie to understand how the increased interest rates are affecting Australia’s mortgage holders and what they could do to help them, has revealed three in four (75 per cent) Australian mortgage holders are unsure how the RBA cash rate increase will impact their household budget, leaving them searching for clarity.
Worryingly, almost three in ten Australian mortgage holders (28 per cent) did not consider that the cash rate would increase at all when budgeting for a home loan, despite having to account for it in their home loan assessments, while another four in ten (38 per cent) only budgeted for the impact of a cash rate of three per cent or under.
“With the increased cost of living pressures, there’s no doubt this is a stressful time for many Australians, particularly mortgage holders,” Karen Sorrenti, State Broking Manager at Aussie said.

Karen Sorrenti. Image supplied.

“Our latest research shows almost one in five Australians (18 per cent) with mortgages are dealing with ‘significant mortgage stress, and a further four in five (81 per cent) confirmed the rising cash rate and upward cost of living is a growing reality, placing unwanted tension on their household.
“However, a staggering number of mortgage holders have not taken action or investigated their alternative options which are one key factor in addressing the mental and emotional strain,” Karen said. 
Aussie research indicates only one in seven (14 per cent) mortgage holders have been on the front foot, revisiting their home loans as soon as the first cash rate rise happened in May this year.
“Over recent years, more Australians have understood the role that mortgage brokers play in helping navigate the home finance market, enabling them to secure finance that best suits their individual needs.
“It’s never been more important for our network of more than 1,000 Aussie brokers to support homeowners to know their options and take action to help manage increasing costs of living and reduce anxiety,” Sorrenti added. 
Meanwhile, for homeowners who hold an ‘underwater mortgage,’ Sorrenti said that there are a number of things that one can do to fix the situation.
“I’d suggest starting with an accurate valuation of your home – this will help you understand what your refinancing options can be.
“Refinancing when your property’s value has decreased or you have low or negative equity presents some challenges, but it is not impossible – we highly encourage homeowners at risk of low or negative equity and experiencing mortgage stress to a mortgage broker about their goals and options.
“There are ways to increase the value of your property – such as making small but impactful renovations to spaces like the kitchen or bathroom.
“This will increase the value of your home, and increase your opportunities to refinance
“Again, we really encourage speaking to a home loan specialist, who can assess your home and all your options is vital.
“Having this level of insight and expertise, especially at such an important time, is vital.”

Here are seven savvy ways to avoid mortgage stress:

● Stop, look and ask; always know what your current rate is, and if it’s fixed, ensure you
know when it ends.
● If you’ve avoided financial literacy, now is the time – it’s the gateway to managing – or
better avoiding – financial distress.
● Do some calculations – be one step ahead on what you can afford for repayments and
what amount would put you on the path to financial strain?
● Practice a mindful money approach, paying attention to your full financial position
● Refinance to a home loan with low or zero fees
● Take advantage of refinancing cashback offers
● Consider an offset account to reduce the amount you pay in home loan interest

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