Your Money

Rates hikes, Christ­mas and weather im­pact on mort­gage pay­ments

Townsville Bulletin - - Inside Today - By Alex Til­bury

SHOULD you have missed t hree monthly mort­gage pay­ments, ex­pect a de­fault no­tice in the mail any day now.

More peo­ple than ever are de­fault­ing on home loan re­pay­ments, ac­cord­ing to credit rat­ings agency Fitch, and the sit­u­a­tion is ex­pected to worsen.

The agency has found bor­row­ers who late last year were be­hind have been un­able to catch up and are reach­ing the three-month trig­ger point for de­faults.

In its re­port, The Dinkum In­dex, Fitch said it found mort­gage pay­ments that were more than 90 days late had in­creased a sur­prise 12.5 per cent in the last three months of 2010, com­pared with the pre­vi­ous quar­ter.

‘‘ Ar­rears un­ex­pect­edly in­creased, mainly as a re­sult of more delin­quent bor­row­ers mi­grat­ing into the 90-plus days ar­rears bucket,’’ said James Zanesi, as­so­ciate di­rec­tor in Fitch’s struc­tured fi­nance team.

‘‘ Mort­gage per­for­mance is also ex­pected to have wors­ened in the first quar­ter of 2011, mainly be­cause of the usual im­pact of Christ­mas hol­i­day spend­ing.

‘‘ The 25-ba­sis-point in­ter­est rate rise in Novem­ber and the Queens­land floods and Cy­clone Yasi might also have had an af­fect on the in­dex.

‘‘ Nev­er­the­less, ar­rears are still rel­a­tively low and, while ris­ing mort­gage rates nor­mally trans­late into an in­crease in ar­rears, Aus­tralian bor­row­ers have shown a strong ca­pa­bil­ity to cope with higher pay­ments in 2010.’’

Resi Home Loans chief ex­ec­u­tive Lisa Mont­gomery said if the writ­ing is on the wall for stressed-out bor­row­ers, they should speak now with their lender and not wait un­til it’s too late.

‘‘ There is usu­ally a re­ally easy fix to mort­gage stress,’’ Mont­gomery said.

‘‘ You can look at go­ing in­ter­est-only for a while to re­duce the re­pay­ment, or con­sol­i­date other loans.

‘‘ But these strate­gies should only be used in the short term to pre­vent fi­nan­cial hard­ship.’’

Mont­gomery said there is no sign of in­creas­ing mort­gage ar­rears at Resi.

If any­thing, peo­ple are sav­ing more than ever, she said.

Per­sonal fi­nance ex­pert and My Bud­get founder Tammy May said many peo­ple bury their head in the sand and fail to ac­knowl­edge they are in fi­nan­cial stress.

‘‘ We are def­i­nitely see­ing a lot of ar­rears,’’ May said.

‘‘ There is no slow­down in our busi­ness but the mort­gage is gen­er­ally the high­est pri­or­ity, or which­ever col­lec­tor is ha­rass­ing them the most.

‘‘ Do a bud­get and work out what you can af­ford in terms of ba­sic mort­gage re­pay­ments.

‘‘ You don’t have to pay it in a lump sum but you don’t want a de­fault no­tice af­ter 90 days.

‘‘ If you con­tinue to ig­nore the is­sue, you will re­ceive a letter of evic­tion, which is dif­fer­ent for ev­ery lender and cir­cum­stance.

‘‘ I know it is em­bar­rass­ing to talk about end­ing up in this sit­u­a­tion. Noone ex­pects it.

‘‘ It throws peo­ple off bal­ance, but bite the bul­let and be hon­est. Ask for help, even if it is a friend or fam­ily mem­ber.’’

Non - con­form­ing low - doc loans usu­ally have delin­quency lev­els more than three times the rate of reg­u­lar loans.

Loan Mar­ket chief op­er­at­ing of­fi­cer Dean Rush­ton said self-em­ployed peo­ple of­ten ap­ply for low-doc loans, which may have higher in­ter­est rates than full doc­u­ment loans and also larger min­i­mum de­posits.

But, he said, low-doc loans have been harder to ob­tain since the global fi­nan­cial cri­sis and due to new Na­tional Con­sumer Credit Pro­tec­tion laws.

‘‘ These peo­ple felt the im­pact of rate rises last year, so they are hit with a dou­ble whammy if they have a strug­gle to ob­tain fi­nance,’’ Rush­ton said.

Im­age cour­tesy of Fotolia

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.