Beware of mortgage interest rate hike

With the possibility of a hike in the interest rate, the first home buyers are warned not to let their budget, go out of control. The important cause for this increase in index is the rise in the house price in Melbourne and Sydney. Limited wage increase and soft labour market in Victoria and New South Wales are the other factors.

New buyers beware

Reserve bank is on its edge to increase the interest rate, in the next year. Thus, the buyers who are entering the market should calculate whether they will be able to afford any hike, in the interest rate. With the current situation as it is, people have got used to the low interest rate and they might not be able to cope up with the sudden increase in interest rate.

Steve Brown’s opinion

The director of Dun & Bradstreet, Mr. Steve Brown says that the mortgage repayment obscurity rises when the repayments are at the rate of 30% of the pre-tax income. According to him, the mortgage holder should have a certainty of his income, with the unemployment rate crawling up.

As of now, the payments that are late by more than two months (60 days) are considered defaults. However, with the new interest rates in March, the payment that is delayed by more than five days will be considered as default.

Source: http://www.smh.com.au/money/borrowing/be-cautious-firsttimers-urged-20131116-2xnn8.html

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