CUSTOMERS saddled with mortgage debt say paying down their loan is a burden for them and it’s taking its toll.
The nation’s top banker, the Reserve Bank of Australia’s governor Philip Lowe, recently warned borrowers interest rates will go up and not down and the value of their home could also fall.
This was a strong word of warning for those thinking things won’t change anytime soon.
Shortly after this three of the Big Four banks all announced they were hiking variable interest rates.
New independent analysis by YouGov Galaxy on behalf of Gateway Bank, which quizzed 1000 Australians, found 56 per cent believe their mortgage is a burden to them.
And 43 per cent say it impacts them somewhat, while another 13 per cent say it limits their lifestyle significantly.
Gateway’s chief executive officer, Paul Thomas, says 30 per cent of disposable income is typically the limit that a borrower should contribute to their home loan each week.
“When someone is on a high salary the 30 per cent doesn’t apply, you can borrow much more, but when someone is on a very low salary 30 per cent is too much,” he said.
“People should be looking to review their mortgage annually.”
For a customer earning $78,000 per annum, their after-tax take home pay is $1145.
This means mortgage repayments should not exceed $343 per week.
But as the recent rate increases start to kick in there are concerns within the industry there could be an increase in mortgage defaults.
Latest data by Fitch Ratings, who monitor mortgage delinquencies, found the nation’s home loan arrears of 30 days or more fell by 5 basis points from 1.14 per cent to 1.09 per cent in the June quarter.
Realestate.com.au’s head of home loans Andrew Russell said there are many simple strategies customers can adopt to help cut down mortgage costs in an instant.
“Use an offset account and put all of your disposable income into it to offset the interest rate,” he said.
“The banks are very competitive at the moment so you might find it cheaper if you refinance to a cheaper loan.”
An offset account is a daily transaction account linked to the home loan.
If the customer has a loan of $300,000 and $10,000 sitting in the offset account, they will only pay interest on $290,000.