Many mortgage holders are well prepared
Three out of five Generation Y mortgage holders are capable of repaying their mortgage at an interest rate of at least 9%, according to a new survey* by Mortgage Choice.
64% of existing borrowers aged 18 to 29 years said they could afford repayments at, or above 9%. Of those, almost half (46%) are prepared to repay at 11% or more.
This demonstrates that Gen Y borrowers, who are more likely to be first homebuyers, are better equipped to tackle the mortgage market than many may think.
Mortgage Choice senior corporate affairs manager, Kristy Sheppard said, “Financial markets are predicting that by this time next year the cash rate will have returned to a more neutral level of around 5.5%, which means variable mortgage interest rates will stand at around 8%. Looking at our survey, results indicate a high percentage of existing borrowers will adjust relatively easily to rate rises.”
“Of course, a number will still find them a challenge and they certainly can be a deterrent for those looking to buy property and wondering whether they should commit.
“With the majority of lenders passing on the October and November interest rate rises, we have seen variable rate loan repayments increase by almost $100 per month, based on an average 30-year $300,000 mortgage with a rate that stood at 5.75% beforehand. If rates increase by a further 0.25% in December and lenders pass it on quickly, the average borrower would be repaying around $150 per month extra before Christmas.
“Tighter lending criteria should play a large part in ensuring new borrowers can afford rate rises, and we would hope these new market entrants have considered the implications and not added other debt after signing their contract. It’s relieving to see the Mortgage Choice 2009 Consumer Sentiment Survey show that more than three out of every five Gen Y borrowers are prepared for higher interest rates.
“First homebuyers keen to get in before the First Home Owner Boost deadline on 31 December this year need to do their sums now – firstly to make sure they have enough saved for their deposit and purchase costs, which will probably be close to or more than 10% of the purchase price, and secondly, that they are in the mindset to cope with rate rises of at least another two percent.
“When considering whether or not you can afford to repay a loan at a higher rate you need to closely monitor all weekly, monthly, quarterly and annual expenses. For example, if a fairly average borrower was to repay their loan at 8%, they could expect their current monthly mortgage repayment of approximately $1,850 to increase by about $305. They have to ask themselves if they can truly live without that $2,155 a month, plus the cost of food and utilities.
“What young borrowers may not realise is coping with rate rises could be as simple as cutting back on a night out once a month or avoiding the car wash and doing it yourself. Small sacrifices can put you closer to achieving your dream, and when you consider the reward of living in your own home, it’s well worth it!
“Of course, the positive effect of a few little sacrifices varies depending on the amount borrowed and the length of the loan term. However, if you take out a loan and down the track you find repayments become a burden you can always shop around and refinance to a more affordable loan, keeping in mind possible costs to do so.”
* The full 2009 Consumer Sentiment Survey results will be announced over the next fortnight.
Call the customer service centre on 13 MORTGAGE, visit www.mortgagechoice.com.au or www.facebook.com/MortgageChoice or http://twitter.com/MortgageChoice.
For further information or to arrange an interview, please contact:
Kristy Sheppard Sarah-Jane Stevenson
Mortgage Choice Reputation
(02) 8907 0502 / 0407 450 860 (02) 8252 7005 / 0432067655
kristy.sheppard@mortgagechoice.com.au sjstevenson@reputation.net.au
About Mortgage Choice
Mortgage Choice, Australia’s largest independently-owned mortgage broker, has a national network of hundreds of franchises and loan consultants supported by Group and State Offices. It provides loan advice on, and choice of, products offered by an extensive panel of Australia’s leading lending institutions.
A number of the company’s consultants provide a broader service offering, also helping customers source personal and commercial loans, asset finance and risk insurance.
Importantly, Mortgage Choice head office pays franchisees the same commission rate for home loans they write, regardless of the rate paid by the lender selected by a new customer – and has been doing so for most of its 17-year history. The company has no products of its own and works in each customer’s interests to source a loan that suits their individual needs.
Mortgage Choice has no balance sheet or funding risk, and consistently delivers strong profits and attractive yields. The company listed on the Australian Stock Exchange in August 2004 (ASX sign: MOC) and is a member of the Mortgage & Finance Association of Australia (MFAA).
Recent awards/recognition: 2009, 2008, 2006 and 2005 MFAA Awards Retail Aggregator/Originator of the Year; 2009 and 2008 BRW Fast Franchises list; No.1 spot on Top 25 Brokerages list by Mortgage Business magazine; 2009 Australian Banking & Finance Awards Best Financial Institution Employer; 2009 Great Place to Work® Institute Best Companies to Work For list; 2009 and 2008 10 Thousand Feet Top 10 Franchise list;2008 MFAA Awards Best In Mortgage & Finance Industry.
Visit www.mortgagechoice.com.au or call the customer service centre on 13 MORTGAGE.
Sarah-Jane Stevenson
Consultant | Reputation Pty Ltd
Suite 2, Level 1, 30 Clarence Street Sydney, NSW 2000
Tel: +61 2 8252 7005
Fax: +61 2 9262 6782
Mob: +61 4 3206 7655
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