How Do You Know You Are in Mortgage Stress?

01st Aug, 2019 | Investor, Refinance

In this article:
If you took this mortgage stress test, would you pass?

An increasing number of Australian homeowners are struggling to meet their mortgage repayments, but at what point does this tip into mortgage stress?

There are several ways to test for mortgage stress. One popular measure is when you find yourself spending 30% or more of your pre-tax income on home loan repayments. Another is when your household income becomes insufficient to cover its ongoing costs.

Financial definitions aside, mortgage stress can be characterised by anxiety about how to keep on top of bills, whether home loan, credit card or utilities. You feel trapped in a negative cycle of never having enough money and not seeing a way to get ahead.

Mortgage stress test

To assess whether you might be suffering mortgage stress, take this quick stress test. Any number of these factors can work together to create mortgage stress.

  • Have you stopped working suddenly and have no regular income to pay your bills?
  • Are you going through a divorce, relationship breakdown or death of a partner and you relied on your partner’s income to pay the mortgage and bills?
  • Are you routinely behind on credit card payments?
  • Do you pay only the minimum due on your credit cards?
  • Do you use your credit card to pay off debt?
  • Are you behind paying off your utility bills?
  • Have you stopped going out or taking holidays because you need this money to pay bills?
  • Are you using your savings for household expenses?
  • Do you pay more than 30% of your pre-tax salary to your home loan?
  • Have you fallen behind in more than one scheduled home loan repayment?
  • Are your money worries affecting your health and personal relationships?
  • Is there any buffer in your finances to cope with an increase in loan repayments should interest rates rise?

Despite interest rates being at an all-time low, the number of Australians suffering mortgage stress continues to rise.

More than one million households, or around 1 in 3 owner-occupied dwellings, are estimated to be in mortgage stress, according to recent research from Digital Finance Analytics. Over 33,000 of these households are in severe stress, with Sydney and Melbourne residents the hardest hit.


For ongoing interest savings, open an offset account linked to your mortgage and put extra repayments into here. An offset account reduces the balance in your loan account by whatever the balance in the offset account is. By reducing the principal, you also reduce the interest charged

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What to do?

Your money troubles are unlikely to go away without help. Many credit providers have strategies in place to assist borrowers who can’t make repayments because of illness, unemployment or other financial difficulties. But if you try to hide your situation out of fear or embarrassment, only letting on when you’ve missed several repayments, it may be too late for your lender to help you.


6 Things to Avoid When You’re in Debt

  1. Borrowing money
  2. Using your credit cards
  3. Opening new credit cards
  4. Ignoring your budget
  5. Impulse purchasing
  6. Pretending you’re not in debt.

It’s also worth taking a look at your home loan product to see if you can get a better deal. Our home loan repayment calculator allows you to enter variables such as interest rate, payment frequency and term to see how your existing loan compares to others on the market.

Ask your Yellow Brick Road mortgage broker to help you compare mortgages to see if there’s any benefit to be had from refinancing. While switching loans may save you money over time, it’s vital to assess whether the costs of switching will help or hinder your debt.