1 in 10 Western Sydney households are under ‘mortgage stress’ - a sign to refinance?
Article by Ceyda Erem
It’s not uncommon for the average Aussie to experience financial stress, particularly with their mortgage, but recent figures from the National Cities Performance Dashboard has revealed that 1 in 10 Western Sydney households have been hit the hardest with ‘mortgage stress’.
Households using 30% or more of their income for home loan repayments are considered to be under ‘mortgage stress’.
The data also found that 8% of Sydney as a whole had this level of mortgage stress, compared to 6% in other major cities.
However, many analysts were not surprised with the results considering the country’s current housing affordability crisis.
“A lack of affordable housing can weigh on a city's economic performance [and] low levels of housing affordability undermine social cohesion and exacerbate wealth inequality,” said the Assistant Minister of Cities and Digital Transformation, Angus Taylor.
But it isn’t just homeowners who are struggling with renters also doing it tough. 1 in 10 urban households suffered from ‘rental stress’ - similar to mortgage stress, with 30% or more of an Aussie’s income being spent on rent.
So with many Aussies feeling the mortgage repayment pinch, there’s no surprise that one quarter of homeowners would be “happy to see house prices fall”.
In fact, a recent survey by ME Bank found that 37% of homeowners would prefer lower property prices with a massive 97% reasoning that it would “help address the housing affordability issue”.
“Traditionally Australians fall into two camps when it comes to property prices: owners, who want them to rise, and non-owners, who want them to fall,” said, ME Bank’s general manager of home loans Patrick Nolan.
“But with high prices disrupting the dream of homeownership and the benefits that brings, views are changing.”
If you’re an Aussie spending 30% or more of your income on your home loan repayments, it might be a good idea to think about refinancing by shopping around on home loans to find a better deal. Here are some of the need to knows for refinancing your home loan.
What is refinancing?
Refinancing involves moving your loan to a new lender that offers a competitive interest rate and more flexible features.
What are the pros and cons of refinancing?
Equity access - Choosing to refinance your loan grants you access to the equity you’ve built throughout your loan. This can then be used to fund renovations, investing or taking a holiday.
Play around with your loans lifespan - You’ll be able to either reduce your repayments by increase the time length or shorten the length of your loan but increase your repayments.
Getting a better rate - This is the biggest benefit of refinancing as a lower interest rate will mean lower repayments.
Lenders Mortgage Insurance (LMI) - Refinancing may also mean paying Lenders Mortgage Insurance (LMI) - a type of insurance that protects your lender if you ever default on repayments.
Fees - As you will be switching lenders, you may have to pay an out of pocket exit fee. These types of fees can be pricey, especially if you’ve got a fixed rate home loan. You’ll also need to pay an application fee when you apply for a new loan, which can be up to $1,000.
Credit history - If you begin your application with a poor credit history, this may impact the interest rate you receive. It’s also important to keep in mind that with each application you submit, either accepted or declined, it will be recorded on your credit file.
Thinking about refinancing your loan? Our home loan comparison tool compares over 500 home loans to help you find a better deal today.