The Cost of Living Crisis and Mortgages — The recent surge in prices for essentials like groceries, utilities, and petrol has made it increasingly difficult for many Australians to keep up with the rising cost of living. This financial strain doesn't just impact day-to-day budgeting - it can also affect bigger goals like securing or maintaining a mortgage.
Lenders can pick up patterns from your bank statements to assess your true living expenses and spending habits when assessing your mortgage applications.

During a cost of living crisis, being able to demonstrate smart spending and lifestyle management is critical. Here's what you need to know about navigating this crisis while pursuing property ownership.

The Lender's Perspective

When you apply for a home loan, lenders dig deep into your income, debts, assets, and living expenses. Their goal is to assess how much you can truly afford and whether you're likely to make consistent repayments based on your financial discipline.

With costs rising rapidly across many spending categories, lenders are paying even closer attention. They want to see that potential borrowers have a solid handle on their day-to-day finances and aren't overextended or living beyond their means living from paycheck to paycheck.

Your living expenses including groceries, transportation, utilities, insurance, childcare, and discretionary spending that can impact your loan approval chances. Keeping these costs low relative to your income is key.

Adjust Your Lifestyle Accordingly

The good news is that some lifestyle adjustments can help put you in a better position for securing affordable home financing. Small spending cutbacks through a period of time can add up to significant savings.

For example, cooking more meals at home instead of frequent restaurant dining, walking when possible instead of driving, doing home workouts instead of paying for a gym and PT. It's all about being pragmatic and resourceful.

Any non-essential expenses should also be heavily scrutinized - things like streaming services, set and forgotten monthly subscriptions, hobbies and recreation. Find ways to cut back without severely impacting your quality of life.

The Importance of Budgeting

Developing and sticking to a reasonable monthly budget is one of the best ways to illustrate your financial responsibility to lenders. Map out your income sources and fixed expenses first, then allocate funds across other spending categories. Leave room for some fun and entertainment, but avoid excessive discretionary costs.

Tracking your actual spending against your budget is also wise. It allows you to identify areas of overspending and make adjustments where needed before costs spiral out of control.

Once you do secure a mortgage, maintaining that same spending discipline is crucial for long-term affordability. Factor your new mortgage payment, property taxes, utilities and maintenance costs into an updated homeownership budget. Having a comprehensive home buying plan that accounts for the true ongoing costs of owning property will prepare you for sustainable success. You'll need to continue living within your means while managing your mortgage alongside other debts and savings goals.

The current cost of living pressures may seem daunting. But if you can implement the tips above now, you will be in a stronger position for homeownership sooner than you might expect.

If you're concerned about how Australia's rising cost of living could impact your mortgage prospects, the team at Investors Mortgage is here to help. Book a consultation to discuss your borrowing capacities and get personalized guidance on navigating this financial climate.