Resi mortgage corporation pty limited ABN 61 092 564 415
Level 3, 458 Wattle Street, Ultimo NSW 2007
Tel 02 9280 0007 Fax 02 9280 0009 E-mail save@resi.com.au PO Box 12 Broadway, NSW 2007
MEDIA RELEASE
MAY 3, 2010
HEAVILY LEVERAGED BORROWERS WILL BE FORCED TO ‘LOOK OUTSIDE
THE SQUARE’ TO FUND SIGNIFICANT RISES IN MONTHLY REPAYMENTS
Leading mortgage lender Resi Mortgage Corporation says the rising rate environment is leaving some
heavily mortgaged borrowers - particularly those with more than an average $300,000 loan - scrambling to
find ways to fund the significant increases in monthly repayments that have occurred since October last year.
Resi’s Head of Consumer Advocacy, Lisa Montgomery, says when official rates do eventually rise again for
the sixth time, these borrowers will be forced to look outside the square for ways to fund the increase in their
mortgage repayments and will have to assess all aspects of their lifestyle and spending habits.
She says: “When lending rates decreased dramatically in the wake of the GFC, instead of using the
opportunity to pay more off their mortgage, some of the highly leveraged borrowers became a little too
complacent and slipped into old spending habits – and it is largely this group who are now feeling the pinch.”
Montgomery says although talk about rates often focuses on the average loan of $300,000, there are a
surprising number of borrowers in major capital cities with mortgages commonly between $400,000-
$600,000, who framed their credit and loan arrangements around interest rate levels twelve months ago and
are now having to service around $330-$500 more in monthly mortgage repayments since October.
She says: “Indeed, some of those borrowers may have been hit with more than that rise in repayments as
some lenders increased their rates beyond the official rate rise. So, when you do have a look at the overall
financial impact on any borrower, it’s clear to see that some will be really feeling the pressure to find that
extra money - with the added prospect of more rises to come.”
CHANGES TO MONTHLY MORTGAGE REPAYMENTS ON DIFFERENT LOAN SIZES
FROM SEPTEMBER 2009- APRIL 30, 2010
Interest Rate
$300,000
$400,000
$500,000
$600,000
April 2010
7.13%
$2,145.28
$2,860.38
$3,575.47
$4,290,56
September 2009
5.78%
$1,892.76
$2,523.68
$3,154.60
$3,785.52
Repayment difference
$ 252.52
$ 336.70
$ 420.87
$ 505.04
With another .25% rate increase
$ 300.85
$ 401.13
$ 501.42
$ 601.70
Notes:
1.
Repayments are based on a loan term of 25 years
2.
The interest rate outlined is the average SVR of the big four banks
Montgomery says the key issue is that borrower behaviour over the last twelve months has seen two distinct
patterns emerge among mortgage holders. The first group is those who have been financially disciplined to
seize the opportunity to start paying more off their mortgage, and the second is those who have used the
reprieve in rates to relax and re-claim old lifestyle habits - and it is this group that is now most at risk.
She says: “However, regardless of where a borrower now finds themselves, it’s clear that now is the time to
make the necessary changes to get back on track by applying the necessary financial discipline to plan
ahead for a rising rate cycle that may be in place for several years.”
Resi mortgage corporation pty limited ABN 61 092 564 415
Level 3, 458 Wattle Street, Ultimo NSW 2007
Tel 02 9280 0007 Fax 02 9280 0009 E-mail save@resi.com.au PO Box 12 Broadway, NSW 2007
-2-
Montgomery says there are numerous options which can save households money and improve their overall
cash flow, including:
Eliminating multiple credit cards and reducing existing card limits. Borrowers should then aim to
pay off or reduce any form of high interest credit.
Revising plans to renovate your existing house or rescheduling those plans for later when rates are
lower.
Considering whether you can alter the structure of your mortgage to save interest by making
fortnightly payments instead of monthly, thereby making more payments over the year.
Keeping a record of all your spending and expenses for a month and looking at where you can
make obvious cut-backs.
Being smarter about when and where you purchase your food and petrol in order to save money.
Keeping discretionary spending to a minimum to get back on track and then, only paying cash for
items as you can afford them.
Looking at utility bills and working out how you can reduce your phone, gas and electricity usage.
Deciding whether you can affect your household earnings by changing the way you are paid so
that it improves cash flow and allows you manage your household income more simply.
ENDS
Media Contact:
Lisa Montgomery, Head of Consumer Advocacy,
RESI Mortgage Corporation: (02) 8204 5012 or 0414 592 553
Karen Bristow - Kardan Consulting: 02 9967 3245
NEWS 
