The Australian inflation rate has been soaring as a result of the pandemic, supply chain disruptions and the war in Ukraine. Economists are predicting continued increase in inflation rates and the Reserve Bank of Australia has been quick to act. The RBA has so far increased the cash rate (at September 2022) to 4.35% meaning many mortgage rates are 5% or more.

With inflation at an all-time high, and mortgage rates increasing in line with cash rates, many households are already experiencing mortgage stress.

What can you do?

If you are finding it difficult to keep up with your expenses, here are some things in which you can do:

1) Budgeting – if you have not been doing this, now is the time to look at your cashflow and start budgeting. Spend only on items that are necessary and stop subscriptions that you hardly utilise.

2) Negotiate a lower interest rate or refinance – borrowers are encouraged to shop speak to their lenders and negotiate a lower rate. Homeowners can also shop around for better rates and switch lenders if required.

3) Negotiate debts with creditors – if you are a sole trader with large debts, you may seek to negotiate a settlement with your creditors, including the ATO for tax debts.

4) Downsize or rent – If you are no longer able to keep up with mortgage payments, you may have to make the difficult decision of selling your property. Selling your property will release you from mortgage payments and you may either purchase or rent a smaller house. If the sale proceeds of your property are not enough to cover your mortgage, this is known as a mortgage shortfall. In circumstances like this, you may negotiate a settlement with the lender.

Contact us for assistance

Pearce & Heers has more than 20 years of experience in assisting clients in dealing with their debts. If you are struggling to keep up with you debts, contact us at our Brisbane or Gold Coast offices for a free no-obligation consult. Our team will be able to tailor options for you according to your circumstances.