The past few years have been tough for a lot of Australians across varying areas of life, in particular home ownership. We have witnessed interest rates fall and rise, surges in property prices, housing shortages and population growth. And while for some homeowners these changes have enriched, for others it has meant unattainable property or mounting debt.
The latest financial stability report released by the Reserve Bank of Australia revealed around one in 20 owner-occupier homeowners with variable mortgages are spending more money than they earn, due to rates and cost of living pressures.* While this figure might not seem like that much, particularly as it doesn’t include those on fixed-rate mortgages, it continues to highlight the growing concern within the housing market.
For those who are feeling the effects of mortgage stress, the impact can be both personal and devastating. Financial uncertainty can be a difficult thing to shoulder, as it can often be looming in the background whenever a decision needs to be made. It can lead to a cycle of debt that some will struggle to get out of.
Overspending on mortgages can force some to make difficult choices about how to allocate their money. This can lead to forgoing essential things such as insurances, which could now be considered luxury expenses.
Some may think that financial stress is just one isolated issue. But the truth is that it can have quite the knock-on effect across other areas, in particular mental health, relationship issues and overall wellbeing. When we are stressed about money, we don’t have much bandwidth to focus on other things. Additionally, mortgage stress can disproportionally affect more vulnerable areas of the population, such as low-income families, single parents, and marginalised communities.
The current environment is hard, but there are some signs that relief may begin to show itself over the next year or so. The economy constantly changes, and often we can be left struggling through no fault of our own.
Is there an easy solution to all of this? Selling up and moving into either a cheaper property or a rental only scratches at the surface, particularly due to the current state of the rental market. Cutting out everything for the sake of keeping a roof over your head may be necessary but may not be sustainable over the long-term. Higher wages? Likely, but unlikely to happen.
One of the few things that can help on the individual level, that also doesn’t rely on economic markets, is education. A lot of us might think that once we’re done with our schooling, we’ve learnt everything we need to know to make it on our own. But financial literacy isn’t something necessarily taught in school, yet without it we can find ourselves struggling before we realise.
Quality financial education can benefit not just those who use it, but also those around them. By educating Australians on various financial matters relevant to their situation, they can gain the tools they need to make informed decisions, build confidence around money matters and create a well-rounded sense of wellbeing.
*Reserve Bank of Australia, ‘Financial Stability Review – March 2024’
