The past year’s interest rate rises along with cost-of-living woes have impacted many mortgage holders, putting more and more people under significant mortgage stress. With little relief on the horizon, the start of a new year is perhaps an opportune time to look at how to alleviate the financial pressures that may be affecting you.

What is Mortgage Stress?

A generally accepted definition of mortgage stress is when over 30% of a household’s pre-tax income is being spent on mortgage repayments.  Mortgage stress makes it difficult for people to make not only their mortgage repayments but maintain other financial commitments as well. This metric is directed more at lower-income households as those on a high income may manage quite well with mortgage repayments of more than 30% of their income.

Implications of Mortgage Stress

The impact of mortgage stress can present itself in other facets of a person’s life, having far reaching implications that exist beyond just the financial. These can include:

• Impacts on personal and professional life – mortgage stress can place pressure on personal relationships along with affecting performance in the workplace.
• Physical and mental health – Health issues may present themselves in the form of sleep disruption, migraines, and heart disease. Mental health can also often impacted and present in the form of afflictions such as anxiety and depression.
• Poor decision making – Those experiencing mortgage stress can make poor decisions such as taking out high risk investments or additional loans to keep their head above financial water.

How to Ease Mortgage Stress

Before your situation spirals out of control, it is best to get on the front foot and mitigate any negative implications the mortgage stress you are under may present.

• Contact Your Mortgage Broker – Your broker may be able to secure additional interest rate discounts from your lender or assist in helping you manage you finances more efficiently.
• Contact Your Lender – Your lender will have a hardship team who can offer solutions based on your circumstance. This may include a repayment pause, interest rate reduction or temporary repayment decrease.
• Review Your Budget – It will may pay to audit your expenses and expenditure to eliminate unnecessary spending and secure better deals on items such as insurances and utilities.
• Access Redraw – If you have paid extra into your loan, redrawing these funds to see you though may be a sound option.
• Refinance to a Cheaper Option – If your conduct has remained sound and there is a cheaper product available elsewhere, a refinance could help ease the pressure.
• Consolidate Your Debt– If you have high interest unsecured debts such as personal loans and credit cards, merging them into your home loan could reduce your overall repayments significantly.
• Consult a Financial Counsellor – There are free financial counselling organizations such as the National Debt Helpline that can offer guidance to get you through this time.

If you are experiencing mortgage stress is important to get on the front foot and put measures in place to minimize the overall impact on you and your finances. Your Blackburne Mortgage Broking team are an excellent place to start to get the right tools to put you back on track.