We all look forward to Christmas being a season of joy and giving. However, this year those with home loans will see increased loan repayments flowing through from the November rate rise.
Not much of a Christmas present!
A typical Victorian loan will face increased repayments of about $110 per month. In and of itself that may sound ok; but this is the fifth rate rise this year. Multiply that by 5 to $550 per month, and you can see the real problem for more recent home borrowers.
Old timers might talk of the 17.5% rates ‘back in the day’ (1989/1990). However back then, roughly 42% percentage of average monthly household income was required to make an average sized loan mortgage repayment. That number is now 51% of income. Today’s borrowers are doing it much harder!
That financial pain is not limited to homeowners. Renters are also rightfully fearful of increased interest costs for landlords flowing through to increased rents.
These are not numbers to ignore. Reviews of budgets and of lending are now more important than ever. Don’t wait. Pretending everything is OK will not make the problems go away.
Strategy suggestions include budget reviews and lending reviews.
• Check bank statements for forgotten entertainment subscriptions, streaming services and fitness memberships. Review each regular fee, they can add up fast.
• Optimise grocery and food shopping. Plan weekly meals ahead. Check your pantry before shopping. Cook extra portions for leftovers to reheat. Make your own lunch. Cut back on takeaway coffees and meals.
• Review your costs for power, gas, internet and insurance. Look for alternative providers then ring your supplier for a discount.
• Review transport costs. Compare fuel and parking costs with public transport costs. Review your habits.
• If you have never worked out your own budget, now is the time to start. Google “How to do a budget – moneysmart.gov.au” for a free (government provided) budget planner with instructions.
• Review your loans. Ask a broker to review your loan interest rates and repayments. In times like these, monthly repayment commitments can be more important than interest rates. Home loans, personal loans and credit cards must all be considered.
Ask for advice from a professional. A mortgage broker can provide credit guidance and assistance. Integrity Finance Australia has served the community since 2006; New clients may email loans@ifafinance.com.au or call 03 9511 8883.
Remember the joy and happiness of Christmas is not directly proportional to dollars spent. It is all about family and friends. We take this opportunity to wish everyone good luck with their budgets, and please have a happy and safe festive season and New Year.