Financial Hardship

Australia’s economic growth slowed markedly in the March quarter, according to new ABS data. Despite a slight 0.1% rise in overall GDP, the ongoing per capita recession highlights a deeper issue, with individual economic output decreasing.

What is per capita recession? Good question. Gross Domestic Product (GDP) represents the total value of goods and services produced by an entire economy, while GDP per capita divides this by the population. So, despite marginal overall growth, the average person’s economic share has been shrinking for 15 months.

Typically, weak GDP would lead the RBA to lower interest rates to boost the economy, however persistent inflation complicates this decision.

In this week’s newsletter, we look at the options availbale to borrowers who are having difficulty making their mortgage repayments.

For Australians facing financial hardship and struggling to meet mortgage payments, several options can provide relief.

Note – If you have any clients that you know are experiencing trouble making their mortgage repayments, have them contact us and we can help them navigate the various options available to them, which include –

Contact the Lender: Communicating with the lender should be the first step. Lenders may offer solutions such as temporary repayment reductions, switching to interest-only payments, or extending the loan term to lower monthly payments.

Hardship Variations: Many lenders have hardship programs that provide tailored solutions based on individual circumstances. These can include payment holidays, where repayments are paused for a short period, or restructuring the loan.

Refinancing: Refinancing the mortgage can potentially reduce monthly payments by securing a lower interest rate or extending the loan term.

Government Assistance: The Australian government offers various forms of financial support for those in hardship. Programs like the Mortgage Relief Scheme provide temporary assistance to eligible homeowners.

Financial Counselling: Seeking advice from a financial counsellor can help you understand your options and develop a plan to manage your debts. Services like the National Debt Helpline offer free, confidential advice.

Sell or Rent the Property: In some cases, selling the property may be a viable solution to clear the mortgage debt. Alternatively, renting out the property can generate income to cover mortgage repayments.

Budget Adjustments: Reviewing and adjusting your budget to cut unnecessary expenses can free up funds to meet mortgage obligations.

Superannuation Access: In extreme cases, it may be possible to access superannuation funds early to cover mortgage payments, though this is subject to strict criteria and potential long-term financial impacts.

Exploring these options with professional advice can help manage mortgage stress and avoid foreclosure by the lender.

Variable

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.

1 Year Fixed

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.