Interest hikes will raise mortgage stress on the Coast

Posted on 12 April 2010

Scott Phillips talks about what causes financial stress and what to do about it.

Scott Phillips
Balance Money

29 Responses to “Interest hikes will raise mortgage stress on the Coast”

  1. Hi Bob,
    Given recent newspaper articles predicting mortgage rates to hit 10% within two years (Sunday Telegraph 11/4/10), I felt it important to reiterate the need to plan today to avoid pain tomorrow.
    Within the past 12 months interest rates have gone from historic 40 year lows, back to the current 10 year average interest rate of around 6.45%.
    If these predictions do come occur we will see repayments on an average $350,000 home loan increase by over $580 per month – bringing average monthly repayments to almost $3,000!
    Remember, people get approved for a mortgage based on a set of financial and lifestyle criteria’s. The lender will usually consider the impact of a number of interest rate rises but rarely do the borrowers. It’s amazing how many people don’t think ahead.
    Too often, people will get a mortgage based on their current situation and then decide to start a family, go on a holiday, buy a car or a big screen TV.
    So what can people do?
    • Do a current spending snapshot. Analyse spending habits and indentify areas of concern. You may be able to trim back in a few areas.
    • Look at mortgage alternatives. What may have been the right mortgage product initially may be completely wrong for your current situation. It is recommended you re-assess your mortgage every 2-3 years.
    • Prioritise / Consolidate debt. Although rolling all your debt into one will cost you more in the long run, it may help your immediate cashflow needs. If you do this it is recommended you make extra repayments as your situation improves.
    • Do a budget.
    • Reduce your debt. Every extra dollar made against your mortgage can add up to shaving years off the term and saving hundreds of thousands of dollars in interest repayments.
    • Get help! We can’t plug the holes of a leaking boat without first finding where they are. We go to the doctors if we’re sick, we get the car fixed when it’s not running well yet we’re reluctant to seek help with our debt problems. Speak to your accountant or seek out a Debt Reduction Specialist.
    Remember, little changes today will make a huge difference tomorrow.

    Scott Phillips

  2. cath harrison says:

    Hi Scott
    The video link did not work, let me know if and when it is working?

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