Like flowers after the rain, interest rate rises are inevitably followed by newspaper stories filled with the woebegone faces of the mortgagees who are calculating how much rising rates will hurt the hip pocket.

The last rate rise was estimated to add around $40 a month to the average $300,000 mortgage. That’s $10 a week. Which adds up to mortgage stress for some. But not all of us.

‘Mortgage stress’ is the term we use to cover the unpleasant reality of what happens when people struggle to meet their home loan payments.

It sounds like something that might be managed with a good massage – and in many cases this is exactly what’s needed. Only it’s not your muscles that need manipulating, it’s your budget. Here’s how to prevent Mortgage Stress keeping you awake at night.

TIP ONE: MAKE THE RIGHT CHOICES

Kristy Sheppard, senior corporate affairs manager for Mortgage Choice, believes there are many reasons why borrowers experience problems with their mortgage repayments. Unfortunate situations such as loss of income, illness or other unforeseen lifestyle changes certainly account for a percentage of those feeling the pinch.
Most of the issues reported by Mortgage Choice consultants, however, could be considered to be less about circumstances and more about choices.
“Household debt becomes the problem,” says Sheppard. “Problems arise when borrowers change their spending patterns after their home loan has been obtained.”

TIP TWO: DO YOU REALLY NEED TO FEATHER YOUR NEST?

When you buy a house, you’ll often want new furniture to bring out its potential. Or a new bathroom. Or a feature wall in the living room. Or a new car to park in the driveway. Or a new television to fill that wall in ‘Dad’s Den’.
“Additional finance obtained through credit cards, personal or car loans, and so-called ‘interest-free’ credit products after the mortgage is settled are often the main causes of mortgage stress,” says Sheppard. “Lending for these products may not be subject to the same scrutiny as home loan lending – in other words, the borrower may end up over-extending their capacity to repay all of their debts.”
So while you rail against the lenders for passing on the latest interest rate rise faster than a Brett Lee bouncer, consider your own part in your stressful situation. Is that extra $10 a week hard to find because your credit card payments are eating up your wages? High interest debt, such as credit card and car loans, needs to be dealt with as quickly as possible. It might be that you need to talk to your lender about consolidating your many payments into one loan – possibly your home loan – to not only reduce the interest rate being paid, but make it easier to budget around one monthly payment.

TIP THREE: WHAT TO DO WHEN FEELING THE PINCH

If you are feeling tense about your mortgage, the best thing to do is to speak to your lender. Despite all evidence to the contrary, the bank does not want to foreclose on your house. What they want is for you to keep making repayments and keep owing them interest for many years to come. To this end, they will do everything they can to keep you in your home. The last thing anyone wants is a fire sale of your property.
The bank may offer to restructure your loan, extend the term of the loan to lessen repayments, provide you with a ‘hardship variation’ or even offer a repayment ‘holiday’.
All banks and reputable lenders are obliged to help rather than hurt you during hard times – so make the most of it.

TIP FOUR: REIGN IN THAT BUDGET

Better still, draw up a budget – a realistic one – that allows you to pay not only that extra $10, but a bit more on top. Putting a buffer in your mortgage is the best way to beat mortgage stress of the future.
“Borrowers must be fully aware that when they take on a mortgage they are making a financial commitment for a very long time – often 30 years,” says Sheppard. “It’s important to sensibly manage their post-mortgage budget.”

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