Australian debt is at all time high
New data suggest that mortgage debt in Australia doubled to a record high in the past 10 years. Housing debt has increased from 2004 to 2015 as reported by Domain.
Furthermore, the report also noted that owner-occupier housing debt has increased which could impact mortgages profoundly.
What the experts are saying
The increase of debt among households can be linked back to the surging house prices. Both Melbourne and Sydney have seen their median house prices swell in recent years.
“This has grown much faster than inflation, which would have increased an asset by only about 34 per cent in the same period,” explained Finder’s consumer advocate Bessie Hassan said.
“Simply put, if you’re serious about entering the property market, this is the predicament you face,” she said.
So how do you deal with managing these challenges if you are planning on buying a home?
3 Ways to avoid a personal mortgage debt crisis
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Learn the market and plan your expenses
One of the best ways to at least become immune or be more resilient to changes and price swelling as such is to plan ahead of time.
When buying a home and taking out a loan, always remember that interest rates will change. You have to prepare for variations in rates – sudden lows or sudden highs.
You need to be cautious and anticipate the extra expense.
An expert mortgage broker will most likely advise you to have around two to three percent buffer to accommodate future increases.
This will keep you safe and prepared for a sudden interest rate hike or unexpected expenses.
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Manage your available credit carefully
Strike a balance between spending and saving. You need to have just more than enough to cover your loan plus any unexpected costs. Learn how to manage a monthly budget which includes a savings plan. Anticipate your expenses and calculate against your income. It is always best to come up with a computation that ends up in savings rather than just enough.
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Consider lifestyle changes
When it comes to achieving certain financial goals, you many need to consider sacrifices to your lifestyle.
This could mean the following:
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- Eating out less
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- Fewer holidays
- Giving up on certain lifestyle and entertainment memberships
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A good mortgage broker or financial planner can best advise you on the best ways to manage debt whilst also living the lifestyle you desire.
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