Finance advice

The top financial goal and burden for 2018 revealed: paying off mortgages

By Sasha Karen
Financial goal, paying off mortgages, mortgage payment

Over one quarter of all Australians have said their first financial priority this year is to pay off their mortgage, but it is also seen by most as a big problem according to new surveys.

Big goal

Results from the ME Bank survey of 1,500 Australians show that 26 per cent of respondents said they plan to pay off a mortgage in 2018.

Following this, tied at second place, was building rainy day savings and saving for something other than a home, both at 23 per cent.

Paying debts registered fourth place at 21 per cent, building retirement wealth was fifth at 19 per cent, getting debt to manageable levels was sixth at 15 per cent, saving for a property eighth at 9 per cent and buying an investment property was 10th at 8 per cent.

These results, according to ME Bank, also show a concern shared by borrowers that rates will rise in 2018, with 62 per cent expect their lender to raise interest rates on their mortgage in the next 12 months.

With a hypothetical rise of 1 per cent, 56 per cent of borrowers said it would adversely impact them, 43 per cent would spend less and 27 per cent of investors would sell their investment property.

ME said the findings reflect a growing concern among borrowers that rates will increase in 2018.

In fact, among borrowers, 62 per cent expect their lender to increase interest rates on their home loan in the next 12 months.

The results also show 29 per cent of borrowers are considering fixing to manage further rate rises, and 54 per cent look to picking the bottom of the market when fixing.

Matthew Read, ME money expert, said he sees rates rising this year, seeing repayments potentially rise “by $50 for every 25 basis point rise on a $400,000 loan”.

“Banks will have already applied ‘stress tests’ to their customers, typically around 2 [to] 3 per cent above the advertised rate, when assessing loan applications, to ensure they can comfortably repay in higher rate environments,” Mr Reed said.

“Borrowers can also help themselves by ramping up extra repayments, checking that their home loan rate is competitive, and consider locking in a fixed rate loan.”

Big burden

In addition to paying off a home loan as a goal, the Mortgage Holder Sentiment Report 2017 by Gateway Credit Union has revealed most Australians believe their mortgage is a burden.

From a total of 1,030 Australians that have or had a mortgage, this survey showed 56 per cent believe their home loan is or was a burden, hampering their lifestyle.

This belief is gaining momentum, with 40 per cent of mortgage holders last year in 2017 viewing their home loan as at least somewhat beneficial, down from 45 per cent in 2015.

Looking at the states with the highest population, 59 per cent of Victorians see their home loan as a burden, followed by 56 per cent of New South Welshmen, while Queenslanders who see their home loan as a burden are in the minority at 47 per cent.

Paul Thomas, Gateway Credit Union’s CEO, said that this could be showing the belief of owning a home is being tainted with the negativity of a home loan.

“We know Australians are heavily indebted, the latest figures from the Australian Bureau of Statistics (ABS) found that around three in 10 households (29 per cent) were classified as ‘over-indebted’. In fact, the ABS research also revealed owners with a mortgage were the most likely households to be over-indebted (47 per cent),” Mr Thomas said.

“It would seem Australians still want to achieve the dream of owning their own property, even at the expense of financial stress. As a result, their home loan becomes a pain-point rather than an advantage.”

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1202 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

" ["fulltext"]=> string(2323) "

Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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