apartment values in suburbs such as Pyrmont and Kirribilli now about 26-27 per cent lower than they were a year ago<\/a>.<\/p>\nWestpac forecasts released in May revealed Sydney and Melbourne would have a downturn in prices this year.<\/p>\n
![\"Australia's](\"data:image\/svg+xml,%3Csvg)
<\/p>\n
Property market sentiment had been weakening in the lead up to Treasurer Jim Chalmers\u2019 Budget release in May. Picture: Hilary Wardhaugh<\/p>\n
Finder revealed that credit card spending was a big driver of rising household debt \u2013 and likely behind some of the push for households to get personal debts consolidated into their mortgage.<\/p>\n
Credit card spending jumped 6.1 per cent over the past year and total credit card balances climbed to $44.2 billion in February, a figure 5 per cent higher than a year ago, Finder noted.<\/p>\n
Shoppers made a staggering 330 million transactions in February, averaging $3,253 per card.<\/p>\n
Much of this rising credit card debt was not getting paid off, exposing the cardholders to much higher interest rates and repayments.<\/p>\n
Those who consolidated these debts into their mortgages would typically get short-term reprieve in the form of cheaper interest charges, but would incur higher long-term charges.<\/p>\n
Finder personal finance expert Sarah Megginson said credit card debt was putting households under pressure to made major adjustments.<\/p>\n
\u201cCredit card debt has become an ongoing financial strain that borrowers are struggling to manage in today\u2019s economic environment,\u201d she said.<\/p>\n
<\/p>\n
Consolidating debt has long been a popular strategy for homeowners, but the timing of such moves could be tricky.<\/p>\n
\u201cAussies put 11.8 million purchases a day on credit cards in February \u2013 and without a clear repayment plan, those everyday expenses can quickly snowball into long-term debt that\u2019s much harder to escape.\u201d<\/p>\n
Comedian Dave Hughes recently spoke to some of the fears many homeowners have about negative equity in a climate where recent government tax changes threaten to pull down home values.<\/p>\n
Commenting in a video posted to social media, Mr Hughes explained that negative gearing and capital gains tax changes could pull down prices and leave recent home buyers in trouble.<\/p>\n
He described a hypothetical situation where someone would have bought a house for $2m and spent an additional $100,000 on the stamp duty, only to realise the value could fall due to the reforms.<\/p>\n
\u201cSo you\u2019re up $2.1m and you voted for Labor because (Albanese) said he wasn\u2019t going to change anything. But he lied and he changed everything. And the property market crashes, goes down 20 per cent.<\/p>\n
<\/p>\n
Rolling a car loan into a mortgage will reduce the monthly repayments but will increase the lifetime cost of the loan.<\/p>\n
\u201cNow all you can get for the house is $1.6m \u2026 but then you lose your job and you have to sell it. And so you\u2019ve lost $500,000. You\u2019ve just lost your lifesavings.\u201d<\/p>\n
Two Red Shoes mortgage broker Brett Sutton said borrowers needed to go in with their \u201ceyes open\u201d if considering consolidating debt into their home loan.<\/p>\n
\u201cRolling personal debts like car loans and credit cards into a home loan carries real risk right now,\u201d he said.<\/p>\n
Mr Sutton added that the cash a borrower would free up from this move needed to be measured against the long-term cost.<\/p>\n
\u201cThat cash flow relief today is materially worth something and shouldn\u2019t be dismissed \u2026 (but) when you consolidate unsecured debt into your mortgage, you\u2019re securing it against your home.<\/p>\n
<\/p>\n
Personal finance expert Sarah Megginson said debt consolidation could be a prudent strategy for those who were disciplined, but it was also risky. Picture: Michelle Swan<\/p>\n
\u201cIf values fall significantly \u2013 and a 20 per cent drop in some markets is a real possibility being discussed \u2013 you lose equity on two fronts: the market moves against you, and you\u2019ve already drawn against that equity to cover debts tied to assets that won\u2019t hold their value.<\/p>\n
\u201cA car rolled into your mortgage today won\u2019t be worth what you borrowed against it in five years, but the debt secured against your home will still be there.<\/p>\n
\u201cThere\u2019s also a long-term cost trap that catches people off guard. A car loan or credit card at a higher rate over three to five years can actually cost less in total interest than rolling that same debt into a mortgage at a lower rate over 25 to 30 years.<\/p>\n
\u201cThe monthly repayment looks better, but the total cost often isn\u2019t. That equation only works in the borrower\u2019s favour if they\u2019re genuinely committed to making additional repayments \u2013 and that discipline is hard to maintain once the immediate pressure is gone.<\/p>\n
<\/p>\n
Comedian Dave Hughes slammed Labor’s changes to CGT and negative gearing.<\/p>\n
\u201cWith rates still likely to rise further, borrowers also need to stress-test what that consolidated debt looks like at a higher rate over a longer horizon \u2013 not just what it costs them this month.\u201d<\/p>\n
Ms Megginson said the benefits of consolidating debt needed to be measured against the risk: \u201cIf property prices fall, homeowners could see their equity shrink faster and if they don\u2019t make extra repayments each month, they could end up paying off short-term debts over decades.\u201d<\/p>\n
MORE: Poorer Aus tenants \u2018worse off\u2019 under new rent rises<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Spiralling living costs and rising interest rates have prompted a growing number of Aussies to roll their personal…\n","protected":false},"author":2,"featured_media":722298,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-722297","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/722297","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=722297"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/722297\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/722298"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=722297"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=722297"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=722297"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}