Westpac says more Aussies are missing mortgage repayments: here’s how to avoid their mistakes
Westpac has found more Aussies are now struggling to meet their home loan repayments, despite positives in the air like lower interest rates and a recovering housing market.
While overall bad debt levels continue to be very low, the proportion of mortgages that are more than three months overdue has risen since the March quarter, from 0.82% to 0.9% this quarter. The number of residential properties Westpac repossessed has also increased from 482 to 550.
This follows reports from two other big banks, ANZ and NAB, which similarly noted mortgage arrears or missed repayments during the June quarter have been creeping up.
Westpac said higher rates of arrears and home repossessions reflect a weaker property market.
RELATED ARTICLE: Mortgage stress puts financial stress on Aussie households: ME Bank
According to Mozo’s property expert Steve Jovcevski, a tougher than usual job market and slowing income growth are possible culprits behind more missed repayments.
“While costs of living are increasing, people’s wages are not, and that’s putting a strain on Aussies trying to meet their home loan repayments,” Jovcevski said.
So for those digging deep into their pockets every month to pay off their loan, Jovcevski recommended shopping around for other offers in the market. By snagging a new, low rate home loan, borrowers can reduce their monthly repayments considerably.
“A lot of people just stick with the big banks and don’t look around,” he said. “Mortgage repayments are going down, but the problem is, cheaper home loan rates seem to be reserved for new borrowers and current customers are missing out on better deals because of that.”
Top tips for refinancing to a better home loan deal
Refinancing your mortgage could see hundreds of dollars trimmed off your monthly repayments.
Even a 1% interest rate difference matters - if you took out a $500,000 loan over 30 years at 3% instead of 4%, you could expect to repay $279 less per month and $100,461 less in total interest over the life of the loan.*
Not convinced? Punch in the numbers into our Switch and Save calculator to see just how much you could save by refinancing your mortgage.
Read on for three quick tips to get you started today:
1. Keep up your repayments for six months
Make sure you haven’t missed any repayments for at least six months before refinancing, as otherwise you can wave goodbye to any hope of getting that tick of approval next to your new home loan.
Skipped on a repayment? Not the end of the world! Jovcevski recommended “sticking where you are, getting yourself six months clear of repayment history and then applying.”
2. Pick the right time
Relationships and home loans have one thing in common: you’ve got to get the timing right!
Let’s say you’re working full-time at a company, but you’re going on maternity leave or moving onto freelancing soon. Consider refinancing before you leave your current role because, as Jovcevski puts it, “the more income and the more stability you have, the more comfortable the lender will be.”
3. Talk to the lender before applying
Think you’ve found the perfect new home loan? You might be tempted to put in your application straight away. But Jovcevski recommended speaking to the lender first and getting an idea of whether you can service the loan.
“That’s because any official inquiry you make with a lender, whether you are or aren’t approved, is a black mark on your credit history,” he said. “Making too many inquiries to too many lenders will actually reduce your credit score, which can in turn affect you getting a home loan or refinancing.”
Compare refinance home loans - page last updated October 20, 2020
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*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The
comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
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