The truth behind soaring interest rates...
Some families are buying less food so
they can pay increased home loans. This national tragedy affects everyone and
Home loan interest rates soar. The
headlines panic through the millions families paying of mortgages.
The hardest hit are the people whose
current repayments no longer cover their interest bill. This is called short
If you were wondering how this happen, you need to look at the changes that happen in the system.
Home loans haven't always been this
easy to obtain, But when the banks were deregulated last year the
Building societies have always
operated in this free market, but they have the disadvantage of being more
Recently banks and building societies
had to fight further competition for depositors money, because of an
Also the amount of money available to
banks and building societies is dictated by the state of the economy
The government doesn't achieve this By
lowering production at the Mint, it does so through the buying and
They also said that the 20 per cent of the home loan mortgages are behind in their repayments.
People who took out their home loan
when the banks deregulated and able to set their own interest rates,
Before then, Interest rate were sets
around 13 per cent. The 800,000 or so home buyers who took out their loan
There is one way to take advantage of
the present situation: The current taxation system makes paying off a home
Its like investing that extra money at
the home loan interest rate and getting the profit tax free. Some banks also
If you cant afford to increase your
regular repayments, you can make a single additional payment and you don't
have to win
Most pundit predict that the current crisis will be short-lived.
Banks generally set a limit of between
30 to 40 per cent of gross income at which people can repay their housing
Some might well have just been able to
meet that criterion back when interest rate were 13.5 per cent, they find
The situation does vary of course.
Many people will make almost super human sacrifices in pursuit of the Great
Some couples in areas where the price
of home ownership are greatest, Have postponed plans for a family
Predicting just when this leveling
process will begin is obviously difficult, But most experts do not see it
Different banks and building societies
have different repayment schemes, some of which cater to the current
The Commonwealth Bank reappraises its home loans every three years. But it has taken the step of sending out letters to its approximately 300,000 home loan customers, advising them that interest rates maybe causing them to lose grounds in their battle to pay off their loan.
Westpac advises customers who fall in
this category automatically. Computers identify who is at risk and they are
contacted by their bank manager.
At present however they also provide a
safeguard against repayment falling behind the higher interest rates. In
some cases it may suit the borrower to let this situation continue for a
short term, in the hope that interest rates
Those who took out their loan during the past 12 months or so may not be in a position to do this, because they may not been able to establish an equity. What a little equity has built up may be quickly eroded. Some lenders, have system of variables repayments which take into account changes in capacity to repay.
Learn more about Debt Consolidation
If you find yourself being swallowed
by your home loan repayment, Or your position is becoming precarious,
While they may not be unanimous over
precisely what can be done to get interest rates down, they do agree
This might mean extending the period over which home loan is repaid. In acute cases, Circumstances may have altered drastically since the loan has taken out. Illness may have struck, Cutting the household income, or they maybe a break up of a marriage or live in relationship.
In the case of incapacity, most lenders encourage barrower to take out insurance. In some cases, it becomes a requirement before the loan is made..
Some State governments offer Mortgage Relief Schemes, which take the form of short-term, interest-free loans that are paid directly into the home loan account. But these are really short term solutions. Demands for these reflect the conditions in each State.
The Queensland Housing Commission also
helps custodial parents to retain the family home when a marriage has
It also has a policy which limits repayments to 25 percent of gross in come. This can reduce the limit to eight percent. The difference in no recouped subsidy from the commission.
But quality home buyers need to have
made their commitment after this year and be paying a higher rate of
As well as its short-term mortgage
relief scheme, the West Australia Government has a home Buyers Guarantee
If the situation is really appalling,
you may have to sell your home and get something which is less of a burden.
If this is