Dealing with mortgage stress

All mortgages can be stressful to deal with however, the term ‘mortgage stress’ specifically refers to household income not being able to cover mortgage repayments (for example, having to spend 30% or more of your wage on these repayments). If your client fits into this category, they're not alone.

A recent survey on a popular comparison site found that 35% of Australians have experienced mortgage stress. And according to a Roy Morgan survey conducted in July of 10,000 owner-occupiers, 17.3% of borrowers are currently dealing with it.

Slow growth for median household incomes (only 2.0%) is believed to be the reason for this increase in mortgage stress (up 0.3% from last year), as mortgage rates have actually fallen. In the same period as the Roy Morgan study, the standard variable rate averaged 5.25%, down from last year’s figure of 5.40%.

Norman Morris, Roy Morgan’s industry communications director, said that one in six borrowers face problems with covering their mortgage payments. He noted that people are increasing the amounts they’re borrowing “most likely as a result of low-interest rates and rising house prices”.

If your client is facing or already dealing with mortgage stress, it can feel insurmountable to them. But there are several things they can do to take the pressure off and make the repayment process a bit easier.

They should consider waiting to purchase another property until they've paid off their current mortgage. While returning to the property market can be tempting, it also can complicate and put further pressure on their finances.

Wage growth is a hard one to tackle—they may not be able to make significant headway here, but they can try. Requesting a pay rise can be intimidating but it’s worth doing. They should do their research, put together a case for why they deserve a raise and be prepared to negotiate before asking their manager. Lastly, they should stay calm and act professionally throughout the process, regardless of the outcome.

As it’s estimated that it takes the wages of two full-time jobs to be able to pay a mortgage, any extra wages will undoubtedly be helpful. Can they fit in an extra job, perhaps casual work like doing shifts as an Uber driver or tutoring students? Any additional income streams will help.

Revisiting budget is also helpful. What can they cut back on or forgo, even if it’s just for a short period? They should record all of their expenses so they have a clear picture of where their money is going. There are many helpful apps to track where money is being spent.

Most importantly, they don’t have to deal with this stress alone. There are free financial counsellors they can talk to on the National Debt Hotline (1800 007 007), or they can visit Financial Counselling Australia for online information and resources as well.