Finding relief from mortgage stress

If you're feeling overwhelmed by your mortgage repayments, you're not alone.

Many Australian homeowners are struggling with mortgage stress because of today's high interest rates. But there are ways to find financial relief and move forward.

Here we'll explore why mortgage stress has become so common and some options to help you if you're affected, and how LongView's HomeFlex shared equity solution could be a way to get back on track.

Why is mortgage stress becoming so common?

For many Australians, mortgage stress is an unfortunate reality. The rising interest rates, inflation, and slow wages growth we've seen since 2022 have made it harder than ever to stay on top of home loan repayments.

According to Roy Morgan data from August 2024, nearly 30 per cent of all Australian mortgage holders were at risk of mortgage stress. For reference, that figure peaked at 35 per cent during the height of the global financial crisis in 2008.

With interest rates sitting at their highest level since 2011, many Australian homeowners are losing a large chunk of their income to the bank, leaving less for other expenses. 

But it's not just interest rates that are causing problems. The cost of living has also gone up, making it even harder to keep up with mortgage payments.

Groceries, fuel, energy bills — everything is more expensive. All these financial pressures together have left many families struggling and worried about their future.

The path forward for those experiencing mortgage stress

If you're feeling the pressure, it's important to know there are ways to ease your financial burden.

The first step is to understand your situation. Look at your income, expenses, and overall finances. Even seemingly small things like ensuring you're getting the best deal for utilities, insurance, internet and phone bills can have an impact. 

Once you have a clear picture, consider talking to a professional for advice. Mortgage brokers or financial counsellors can give you a new perspective and might help you negotiate better terms with your lender or find other solutions.

Another option is to look at refinancing. Even with interest rates changing, it’s worth seeing if you can find a better deal. Refinancing could lower your monthly payments or give you more flexibility. Some lenders may even have special offers or incentives to switch, so it's worth exploring your options.

LongView has some more detailed information on how making a number of smaller reductions to your monthly spending could add up to a significant saving. 

Most importantly, remember that you're not alone. Thousands of Australians are in similar situations, and there are people who can help. The key is to act early — waiting too long can limit your options and make things more stressful.

Tapping into your home's equity may be an option

Australian homeowners are increasingly house-rich and cash-poor, often with hundreds of thousands of dollars tied up in their properties while struggling to handle day-to-day expenses or save the necessary cash to make their next steps.

If you've been in your home for at least a few years, you may have built up enough equity to take advantage of a shared equity agreement, or SEA. 

Shared equity involves a third-party partner like LongView paying the homeowner a lump sum of cash in return for a share of future property growth. This can translate to making a meaningful dent in the size of your mortgage so your future mortgage payments are easier to cover without incurring any additional debt. 

The advantage of shared equity in this situation is that you are able to keep living in the home you love. 

Just as importantly, it avoids the transaction costs of selling your existing home and buying a smaller one. Real estate agent commissions and stamp duty can cost tens, if not hundreds, of thousands of dollars.

It is important that you seek professional advice from a financial counsellor or lawyer before making any decisions. Free and confidential financial counselling is available through the National Debt Helpline.