Low interest rates help ease mortgage stresses | The Australian

THE number of Australian families facing mortgage stress has fallen by 300,000 from its peak last August as lower interest rates and government stimulus packages ease the pressure on households.

But the respite provided by $52billion in government handouts and rate cuts totalling 400 basis points since September will be short-lived, as the number of families facing home loan repayment stress is set to skyrocket later this year as job losses bite. More than 1.2 million households could find themselves in some form of mortgage stress if unemployment reaches 7.5 per cent by December, with 460,000 families "close to the edge", said Martin North, managing director of Fujitsu Consulting.

Other figures released yesterday by researcher RP Data-Rismark show housing prices are bumping off the bottom, rising nationally 1.1 per cent in the first two months of the year, after falling 3 per cent last year. First-home buyers, who took advantage of the increased grants, and interest rates at 45-year lows of about 5.9 per cent, would be hardest hit, Mr North said. "If unemployment were to rise to 7.5 per cent by December, up to one-third of the 125,000 first-time buyers who entered the market in the last 12 months could find themselves in mortgage stress."

Mortgage stress is generally regarded as paying more than 30per cent of household income in home loan repayments. Fujitsu bases its definition on 13 survey questions asking about people's ability to repay their mortgage.

"Falling interest rates and government intervention have made a significant positive impact on mortgage stress," Mr North said."This is good news in the short term, and the additional government payments will reinforce this trend over the next couple of months."

Fujitsu's March survey found the number of households suffering mortgage stress fell 5.5 per cent compared with February, with 587,000 families in some degree of pain.In a survey of 2000 households, the consulting firm asked first-home buyers if they could afford to buy, with the number saying yes jumping from 21.5 per cent in June last year to 53.4 per cent per cent in March.When asked how important the first-home owners grant was, 56 per cent said it was vital or very important last June compared with 85.4 per cent in March.The survey found people's biggest worry in terms of servicing their mortgage was fear of unemployment, followed closely by the poor performance of their investments

Low interest rates help ease mortgage stresses The Australian

First Home Loan Specialists Comment

The advantage of using a Mortgage Broker is that loans are tailored to individual circumstances. Reputable mortgage brokers will ensure that rising interest rates are included in the loan analysis.

The other impact of unemployment can also be addressed through available loan products that allow for borrowers to have a "grace" period where the interest accumulates on the loan and no repayments have to be made.

So if your in a relatively stable job and use a repuable mortgage broker then the risk of mortgage stress should be minimised.

Greg Brierley
Principal

T: 1300 884 809
F: 02 6241 2545
E: Greg@firsthomeloanspecialist.com,au
W: www.firsthomeloanspecialist.com.au

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