Aussie Home Loans Bundaberg franchisee George Farmer said the high mortgage stress statistics were unsurprising.
Aussie Home Loans Bundaberg franchisee George Farmer said the high mortgage stress statistics were unsurprising. Paul Donaldson BUN130616AUSSIE1

Mortgage strife for Bundaberg households

SKYROCKETING power bills, childcare costs and council rates are combining to put financial pressure on Bundaberg households.

The region can now lay claim to being the third worst for mortgage stress in the state.

Digital Finance Analytics has released mortgage stress and default modelling for Australian mortgage borrowers to the end of August that shows Bundaberg is only behind Toowoomba and Mackay.

According to the modelling, about 26% of mortgaged households in Bundaberg are in stress and if the Reserve Bank of Australia was to increase interest rates, incrementally, by 2%, almost 50% of mortgaged households would be under stress.

In some relief for mortgage holders, the RBA yesterday decided to leave the official cash rate on hold at 1.5% for the 13th consecutive month.

Along with a high unemployment rate and stagnant wage growth, Digital Finance Analytics principal Martin North says Bundaberg households are feeling the squeeze.

"Those households in mild stress have little leeway in their cash flows, whereas those in severe stress are unable to meet repayments from current income.

"In both cases, households manage this deficit by cutting back on spending, putting more on credit cards and seeking to refinance, restructure or sell their home.”

Mr North said about 170 of mortgaged Bundy households were at risk of defaulting on their home loans in the next 12 months.

OVEREXTENDED: ABC's interest rate prediction tool uses the Digital Finance Analytics' model.
OVEREXTENDED: ABC's interest rate prediction tool uses the Digital Finance Analytics' model. Jim Alouat

Aussie Home Loans Bundaberg franchisee George Farmer said the statistics were unsurprising.

"It is an issue but I don't know if it's as big an issue as it's made out to be,” he said.

"Sometimes it's as simple as finding a more suitable loan with a better interest rate or just extending their term.”

Mr Farmer said it was vital people experiencing mortgage stress dealt with the issue head-on.

"Speak to your broker or bank and be upfront with them and lay all the cards out on the table,” Mr Farmer said.

"For people looking to buy, be honest with yourself about a really thorough household budget.

"Make sure you have a buffer for things like unexpected expenses, interest rate rises.”

Top tips for avoiding mortgage stress

  • Draw up a budget - only half of households have one.
  • Prioritise spending
  • Resist the temptation to put more on credit cards - leads to issue later
  • Care refinancing, as it may not be a good solution - often leads to more debt later
  • Remember banks have an obligation to assist, in cases of hardship, so if you are in strife, do not put your head in the sand - better to deal with it - do not assume income growth will get you off the hook, it is unlikely.


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