Australians should be “careful” about their Christmas spending this year as the RBA raises cash rates by 25 basis points.
A Christmas budget bust not only threatens those who already have mortgages, but Australians looking to buy a home next year should be careful about how much they spend.
Peter White, Managing Director of the Financial Brokers Association of Australia (FBAA) said:
“The risk is that if someone takes out a loan and spends a lot of money, depending on how far they’ve gone, it could ruin their opportunity to take out a loan,” he said.
Banks will look at a potential customer’s discretionary or non-mandatory spending to determine whether they need to offer a mortgage, also considering holiday season expenses, White said.
The FBAA expects the RBA to continue raising interest rates by at least 50 basis points, so White expects those with mortgages to see their budgets tighten significantly over the holidays.
“People’s repayments will go up and up as we head into the new year,” he said.
“If you already have a mortgage, you have to be able to keep paying it off, which can ruin your discretionary payments.”
Mr White warns that some Australians will not be able to get out of higher rates while owning a house.
“There will be a lot of people who will face financial hardship. It can be hard or they can’t pay their bills.
For those worried about making their payments, Mr. White has one simple instruction.
“What we recommend to our members is that they need to figure out what a 5.5% repayment looks like and start pushing that rate forward,” he said.
“The reduction in fixed interest rates from a few years ago is a huge leap and should be set aside and forgotten.”
If you face serious financial hardships over Christmas, White says it’s best to leave early.
“Take control of the situation. Put your house on the market and sell it. When the bank sells it, they will take whatever money they can get for it, keep it all, We will lower our credit rating.”
https://www.theaustralian.com.au/breaking-news/huge-risk-christmas-budget-blowout-could-affect-your-mortgage/news-story/1d7e0ba60f3d24f30b67d324f140a576 Big risk of Christmas budget bust