Here below is an article from “Mortgage Professional Australia.”
This is a body that provides information about mortgages and houses in Australia.
Read the article below, it is quite interesting regarding how our housing market, mortgages and potential areas of mortgage stress might be in the future.
The bold sentences are added and aren’t part of the article hopefully to make the information more clear to everyone reading it.
RBA warning over excessive mortgage debt
The Reserve Bank of Australia has expressed concern over the increasing level of household debt relative to income.
The bank says that Australians should be aware that wages are behind increasing costs and gave a reminder that interest rates will inevitably rise.
It’s not good to have a high percentage of your expenses per month i.e. 40%+ going to the bank. How else can you function as a family?
Although in the most expensive areas the ‘expected repayment burden’ is roughly at the 10-year average, the low interest rates are not typical over that period. The warning highlights the importance of adding in some ‘wriggle room’ when calculating home loan repayments.
What do they mean by wiggle room? Examples of wiggle room could be being having more of a deposit than 5% when going for a loan, have a buffer of 3 -6 months payments in reserve an account to cover a short term loss of job or another related circumstance.
The RBA pointed to NSW and Victoria as the areas where the payments to service mortgage debt is close to historical highs, due to the fast growth of house prices in those states.
If NSW and Victoria have high prices at the moment, maybe waiting for rates to rise and prices to slow, will help you give you time to save a decent deposit, get some money in reserve when you decide to buy a house, and purchase a house where prices are not at the peak of the cycle. Or look to Brisbane, which according to numerous property experts is where the next boom is about to occur.
Anyway, if the RBA is warning people of not getting into excessive mortgage debt, they believe it’s a real problem that is in the marketplace today.
At Property Solutions for Australia, we specialise in helping people avoid mortgage stress and help to provide positive outcomes that give people a sense that they can move forward with their lives.
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