Mortgage stress is classified as paying more than 30 percent of your income to cover the cost of your mortgage. However, there are ways that a first home buyer can avoid this kind of stress.
According to studies, Australians are currently paying 31.7 percent of their median weekly wage on their home mortgage. This means that many Australians are finding that paying their mortgage is a financial burden.
Housing groups, such as the Real Estate Institute of Australia (REIA) suggest that housing in Australia became less affordable during the second quarter of 2015 as home prices increased. New South Wales is said to be the worst state for housing affordability with home buyers spending on average, 38 percent of their income to cover their home loan costs. The ACT, on the other-hand, is the nations most affordable state with 19.3 percent of a home buyers income, on average, covering the cost of their mortgage.
However, in saying this, home prices are expected to fall in some states with only marginal price growth expected across Australia during 2016. This is likely to encourage more first home buyers into the market as homes become more affordable.
At present, first home buyers make-up 15.6 percent of the owner-occupier market. On average, first home buyer loans are around $350,000, which is just under the national average of approximately $350,000.
First Home Buyers Fear Out-Of-Cycle Rate Hikes
Many Australians who are planning to buy a home within the next 2-years said that they were concerned about lenders raising their rates independent of the Reserve Bank of Australia (RBA). In fact, according to a recent survey 57.5 percent of first home buyers said they were very concerned about lenders raising rates.
This response comes after more than 12 lenders raised their investor and owner-occupier interest rates in November, 2015. For a home buyer who had a mortgage of $400,000 at 5.43 percent interest this will add an extra $45 to their home loan. However, despite these rises in rates, home loans are still at the lowest theyve been in 50-years.
Therefore, if youre thinking of buying a home, then now represents a great time to buy. Plus, there are ways that home buyers can counteract rate rises so that they save more on interest.
Ways You Can Beat First Home Buyer Mortgage Stress
If youre concerned about having to pay 30 percent or more of your wage on your home loan, then there are ways you can avoid this so that youre not hit by the mortgage stress bug. The following tips will keep you below the threshold:
Are you looking to buy your first home? If you said yes, then its time to talk to an eChoice home loan lending expert. We can help you find the most affordable home loan for YOU.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!