Mortgage stress leading to higher credit card debt

Results from a new survey by Fujitsu Consulting and Wizard Home Loans estimates that 91,000 West Austalian households will be experiencing mortgage stress by the end of 2008, with arounf 50% of those suffering serious stress and struggling to make repayments.

Of even more concern for WA home owners is the prediction that house prices could decline, bringing with it the risk of home owners owing more to the banks than their house is worth.  WA has seen huge house price rises over recent years as the resources boom and migration from overseas has seen house prices soar.  However, 2008 has not been such a good year for house prices and the boom was non-sustainable and declines in some area have already occurred.

The survey founds that the first thing that happens when people are experiencing increased levels of mortgage pressure is that they start putting more debt onto their credit cards. Credit card debt can be a very expensive form of debt when used with the wrong type of cards. Some cards are currently charging over 20% interest which is far more than a personal loan would charge.  People in these situations should be looking at creating and reviewing their budgets to live within their needs, considering options such as debt consolidation loans or making balance transfers of credit card debt to a low interest credit card with rates closer to 10%.

AS the credit crisis continues and Australian interest rates remain high it is likely that Australians nationwide will be feeling the pinch and must ensure that they prepare and adjust their finances to get through this period without the issues of severe mortage stress.