Before your eyes glaze over with boredom, what do you think is the main cause of mortgage stress?  Most people are quick to point their finger at the banks, people’s lifestyles and the economy in general.  But a report from Genworth Financial, one of Australia’s largest mortgage insurers, found that while rising mortgage repayments did put pressure on the household budget, generally it was a significant lifestyle event that acted as a trigger for a borrower’s inability to meet their debts.

Their research found illness or injury was the biggest cause of hardship, representing 38% of hardship applications in comparison with just 2% of applications because of over commitment to a mortgage.

These interesting statistics lead me to my next favourite topic, underinsurance, where you don’t have enough insurance to protect yourself, your home or your family if a catastrophic event occurs.    I have already written about the massive problem of underinsurance in my earlier blog Life Cover – Protect your family from life’s surprises so I won’t revisit the figures in this article.  But if you’re curious, have look at my blog as it has some interesting figures about life insurance, or rather the lack of, life insurance in Australia

In any event the article did give me cause to ponder, once again, on why people aren’t taking out life insurance.  It might be that people are not sure how personal insurances work or believe it is out of their budget.   Maybe people feel intimidated approaching an insurance adviser for advice.

If you think you’re underinsured, the biggest favour you can do for yourself and your family is at least take the first step and contact your financial planner or insurance adviser to allow them to assess your situation.   Don’t be shy – whatever your budget, whatever your situation, there is an insurance plan out there that suits you and your family.    

If you’re still not convinced that you need insurance to protect your families, consider this.  Life insurance isn’t about you, it’s about the people you leave behind who have to pick up the financial pieces after you’re gone.  Give us a call on 1300 766 323.

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.

It’s sad, it’s tragic, a young couple forced out of their home because of rising interest rates.

But what really is mortgage stress?

I know that interest rates have risen, that fuel is up, I have a mortgage and a car.  I also know that purchasing your dream home first time around probably is not the smartest thing to do and I also know that filling your house with all the latest electrical gadgets on 1,000 days interest free is also not the best way to ensure your financial security.

I also seem to recall a time when banks looked at your income and calculated your loan repayments based on your ability to repay.  I also remember a time when first time around a young couple starting out maybe purchased a unit, or a low set three  bedroom brick (with no ensuite) in the suburbs and traded up to the fancy Mcmansion with four bedrooms, two bathrooms and a media room.

I also remember a time when interest rates were at 19%.  That creates real mortgage stress.

Perhaps the lesson to be learned from the current credit crisis and resultant mortgage stress, (which in my travels I have seen a lot of) is that much of it is self inflicted. 

Why? – Well 1,000 days interest free, no deposit, no repayments for 12 months, whatever the offer, it all means that you are committing your future income on the purchase of some sort of electrical appliance that you will take home now, get used to, enjoy it and then get a shock when you have to start making the repayments that you forgot to budget for.

Add in an interest rate rise or two and you have a double whammy of increasing mortgage repayments as well the repayments on last year’s television set.

No wonder we are hurting, we are still paying for last year’s spending and committing next year’s against items that have lost their gloss and shine.

Maybe it’s time we all – and this includes the lenders – take a step back in time, tone down our expectations and live to our incomes.

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.