There are two big items in the mortgage news this week: for those of us already in the mortgage market, I’m looking at whether or not we can afford to pay higher interest rates, and if you’re someone who’s waiting to buy their first property and are trying to get a mortgage, there’s news about more home loan applications getting knocked back.
First off: nobody likes to pay more interest (well the banks like it if we do, but they’re alone in enjoying that!) so it was a pleasant experience last week to blog about there not being an interest rate rise after the Reserve Bank held their June meeting. But the interesting survey results in this week are that most of us could afford quite a few more interest rate rises.
A study of almost 500 people who have mortgages in Australia just found that three quarters of us would have no (or few) problems to pay up to 0.75 per cent more in interest on our home loans. A quarter of people surveyed suggested that they would be in financial trouble if interest rates hit 7.5 per cent. Of course, you should always take out a mortgage on the understanding that rates could rise, and factor that thinking into how much you borrow, but your circumstances change during the life of your mortgage so it’s interesting to see that most of us won’t be struggling if rates continue to rise as predicted.
However, if you haven’t got a mortgage yet, you might be struggling to get your application accepted. Tighter lending criteria – for example, a while ago we talked about the demise of the 100 per cent mortgage – means that more applications are being rejected. The biggest reason is that prospective borrowers don’t have a big enough deposit, so if you’re looking to get a mortgage in the near future, concentrate on saving up the biggest deposit that you can.