by Lisa Montgomery

THE HIDDEN MORTGAGE STRESS OF HIGH INCOME EARNERS

Leading non-bank lender Resi Mortgage Corporation says hidden mortgage stress among high income earners is a genuine and growing development within the property market for 2011.

Resi CEO Lisa Montgomery says although much is made of the impact mortgage stress has on everyday borrowers, evidence is mounting that suggests it is also an issue with some high income earners, but few people  - least of all the affected borrowers, are talking about it.

She says: “High income earners who are financially overstretched are quietly making lifestyle changes, deleveraging and selling investments in their bid to reduce loans and other debt and avoid the unwanted public attention they would have if they had to foreclose on their mortgage.”

Montgomery says sales of properties in the higher end of the market are moving slowly and at discounted prices than those in the popular middle market price bracket, indicating demand has weakened and more borrowers are shying away from the higher priced properties, particularly in Queensland.  People are buying what they need – rather than what they want.

“In the time since the GFC some overleveraged borrowers in the higher income bracket are finding their incomes have not kept pace with rises in mortgage repayments – and as a result they have reached an impasse where they have to now take action,” she said.

According to Montgomery many of these borrowers are also making significant reductions in discretionary spending on larger ticket items such as holidays, homewares, entertainment and clothing as cuts in these areas can have an almost immediate effect on the hip pocket.

“If more than thirty percent of your gross income is going towards your mortgage – that’s when you need to determine if you can sustainably continue to meet those repayments,” says Montgomery.

With mortgage stress generally defined as a point when homebuyers are paying thirty five per cent or more of their income on home loan repayments, Montgomery says it’s important for borrowers to know when that point is edging closer and address the financial imbalance.

“A key skill for any borrower is managing the balance between ongoing financial commitments and your income. And as both of these will vary over time, you need to aware that if one changes, adjustments need to be made on the other side of the ledger in order to bring things back into a healthy and workable financial equilibrium, she added.

Montgomery says there are many solutions that can be reached, but the first logical step is to speak to your lender.

She says: “For some used to calling the shots in their careers, this may mean putting their pride aside and discussing the situation honestly with the institution that’s lent them the money in the first place. In most cases, both parties can work towards a suitable outcome.”

“Whether that’s putting some short term measures in place to buy some time to work out a more long term solution, or whether it’s mapping out a personal financial strategy which may necessitate some serious lifestyle changes to take them out of the mortgage stress category – either way there are workable ways out to avoid what can be a damaging situation, “she adds.

Montgomery concedes that mortgage stress is difficult for any borrower – whatever the size of the loan.

“So it’s important to remember not to bury your head or feel like you are alone. The right help is there - you just need to look for it,” she says.

 
ENDS

Media Contact:    Lisa Montgomery, CEO,
RESI Mortgage Corporation: (02) 8204 5012 or 0414 592 553

Karen Bristow - Kardan Consulting: 02 9967 3245


Published on: 1/05/2011

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