How you can put an end to mortgage anxiety

Rate rises in 2022 have added to mortgage costs and made many homeowners anxious about the future. Here's how to deal with it.

It's common for mortgage owners to feel overwhelmed by the responsibility of servicing a mortgage, but "mortgage anxiety" is not always a useful or accurate indicator of individual circumstances.

On the first Tuesday in August, the Reserve Bank of Australia (RBA) increased the official cash rate by 0.5%. Many experts predict another rate rise for September.

What this means for anyone with a variable rate mortgage is their home loan became 0.5% more expensive in August.

For instance, if you have a $500,000 loan balance and an interest rate of 3.5%, your repayment has increased from $2,245 to $2,387 per month after this rate hike.

However, since the beginning of the year, your repayments would have jumped up from $1,911 – an increase of almost $500. When you crunch the numbers like this, it's no wonder people are feeling anxious about their mortgage.

Where does mortgage anxiety come from?

Anxiety often stems from a feeling of having little to no control. With finances, many households frequently operate on autopilot with no real checks and balances on spending habits and income.

Psychiatrist and psychoanalyst Prudy Gourguechon has cast light on the huge role emotion plays in financial matters, particularly feelings of fear, guilt and shame.

The visceral fear of not being able to afford a roof over your head is a key component in worries about mortgage payments, coupled with the guilt and shame many of us feel about how we manage our money.

Perhaps you feel like you should have saved more or were irresponsible about money at some point in the past. And when so many households are feeling the cost of living pinch, it's hard not to get caught up on the mortgage anxiety bandwagon.

Anxiety is infectious and it can be a good thing if it's the wake up call you need to get your finances in order. But it doesn't signal that you're headed for dire straits.

For example, if you're a good saver with a decent income, a healthy financial buffer and a solid budget that has wiggle room to accommodate the incoming rates rises, you may feel worried about the mortgage price increases. However, the reality is you're well set up to weather the storm.

How prepared are homeowners for more rate rises?

Analysis from the RBA has found that around half of homeowners with a variable rate mortgage have "enough prepayments to service their current loan repayments for almost 2 years or longer".

But it also noted that people with high levels of debt are more vulnerable, especially as inflation can mean "a loss of real income".

This follows findings that first home buyers are the ones most most likely to experience mortgage stress. Those who have been servicing their mortgages over a longer period are more likely to put the rate rises down as just another low point in a normal economic cycle of interest rate fluctuations.

High income, high stress

Another intriguing aspect of mortgage anxiety is that it's high income earners that tend to experience it most keenly. This proves that money angst can hit anyone, no matter their income or actual situation.

Feelings about money aren't always rational. It pays to spend some time exploring where your mortgage anxiety is coming from instead of letting it overwhelm you.

Practical ways to address mortgage anxiety

Before launching into panic mode, consider what percentage of income your mortgage repayments are now.

If they increase, what resources do you have on hand to adapt to the price rise? Do you have a steady income stream and is there potential to increase your salary? How much do you have in your offset account?

The answers to these questions may help alleviate some of that anxiety. But if they churn up more dread about the state of your finances or your ability to manage the increasing costs of your mortgage, there are a few things you can do such as refinancing and speaking to your lender.

You can also look at further education to improve your financial literacy.

Beyond basic budgeting skills, it's beneficial to get across your finances from the perspective of your credit rating, estate planning, investing and more. I recently helped design the MUM CFOs Money Masterclass course to help women in Australia achieve exactly this.

Last of all, if mortgage anxiety is still keeping you up at night and you've already refinanced, updated your budget and made an effort to shop around and pay less for your other bills, the next step is to plan ahead.

Interest rates are predicted to get even higher before Christmas. If you're prone to feeling stress, you can find ways to start saving now by selling items you no longer need on Facebook Marketplace or Gumtree. You can earn extra money with a side hustle.

Ultimately, the rate hikes may be unpleasant, but they're not expected to last forever.

The silver lining is that, in discovering ways to navigate tough times, you gain confidence in your ability to cope with tough financial situations. And there's no better antidote against mortgage anxiety than great financial skills, hope and confidence.

Louisa Sanghera is an experienced businesswoman and finance broker based in Sydney. She created Zippy Financial after a 25-year career in banking. Through experience, she noticed the brokering industry was generally lacking in empathy and genuine client-focused care. She decided to use her expert knowledge and extensive management training to start her own business and Zippy Financial Group was born. She is also the mortgage broker expert in the MUM CFOs Money Masterclass, a course to empower women to confidently piece together all the components required to solve their own unique personal financial puzzle.

Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.

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