Leading non-bank lender Resi Mortgage Corporation has urged mortgage holders set to benefit from Federal Budget tax cuts, childcare rebates and baby bonuses to avoid viewing these as a ‘windfall’ but instead, ensure they address their personal credit situation.

 

Resi’s Head of Consumer Advocacy, Lisa Montgomery, says the measures announced this week may offer some temporary relief to people managing their mortgages, but that is only half the battle.

 

“After twelve consecutive interest rate rises by the Reserve Bank, many Australians are not only experiencing mortgage stress, but stress caused by an unsustainable reliance on other forms of credit,” says Ms Montgomery.

 

“With Australia’s credit card debt now more than $43 billion* – and thousands of families ‘credit stressed’, it’s obvious that as a nation we need to change our attitude and behaviour towards money.

 

“Uniform regulation in the area of personal credit would go a long way to assisting those most vulnerable to credit issues, but in lieu of that, Australians must work towards reducing personal debt levels and their propensity to spend on credit,” she added.

 

Financial relief for some families and mortgage holders in this Budget comes from raised personal income tax thresholds; an increase in the childcare rebate for families from 30% up to 50%; and an increase in the newly means-tested baby bonus up to $5000.

 

However Montgomery says this is also a critical time for borrowers who have been specifically targeted to benefit from such initiatives, to think long term about their spending patterns and exercise control with any additional money that becomes part of their family budget.

 

“Don’t cause more stress for you and your family by spending any new money on discretionary items such as those advertised in mid-year sales,” says Montgomery. “Be disciplined and use it to reduce your debt and give yourself some breathing space.”

 

To get control of your finances, reduce your reliance on credit and work the Budget to your best advantage, Montgomery suggests considering the following strategies:

 

 

- Review the number and type of credit cards. By doing this you aim to consolidate this high interest short term debt. Use any extra money coming into your family budget to pay off your credit card debt as soon as possible.

 

- Reduce the number of cards and the credit limits. This will reduce not only the temptation but your ability to spend during particular times of the year such as mid-year sales.

 

-Speak to your lender  -about the merits of rolling your high interest debt into your mortgage.

 

- It’s OK to say no – when offered a new credit card or increased credit limits.

 

- Loan Program Conversion. If you did not provide your full financials at the time of your loan application, you may be eligible for a reduction to your interest rate by providing updated financial information.

-  Change repayment frequency. Halving your monthly repayment and paying it fortnightly results in more repayments each year, reducing the term of your loan and the interest you pay.

-  Extension of Loan Length. By extending the length of your loan, repayments are spread over a greater period, resulting in a reduction in repayment amounts.

-  Interest only repayments. By switching to interest only repayments you temporarily reduce your ongoing commitments.