The benchmark S&P/ASX 200 hit a nine month high early in May, closing at 4,429.5 points after the Reserve Bank of Australia cut interest rates by a larger than expected 50 basis points. Since then, renewed fear of a disorderly Greek default and exit from the Euro has been a major driver of a flight to safety and subsequent falls in global share markets.

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European sovereign debt issues continued to influence local and international markets over the past quarter. While Australian shares and bonds continue to produce strong income, the volatility of share prices continues.

Europe remains the drag on global markets. The debt crisis lingers and has seen several countries have their credit rating downgraded, including France. Germany remains the only major European economy with a triple-A rating. The Greek debt crisis provides ongoing news headlines out of Europe. European leaders are offering additional funds to prop up the Greek economy provided strict austerity policies are introduced, designed to cut costs, boost the governments ailing revenues and cut debt levels. With so many European countries and institutions involved, it is a slow and complicated process.

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It will not come as a surprise to any of you, especially the first home buyer, that Australia has one of the most expensive property markets in the world. Capital city house prices have more than quadrupled and household debt has tripled since 1990.

The recent annual Demographia survey of house prices across seven English speaking nations places Australia up front, with the exception of land starved Hong Kong, Australia remains the highest cost housing market in the Anglo world. Out of the 325 metropolitan markets around the world, Sydney was the 3rd most expensive and Melbourne the 5th with other major cities not much better. In the US, many bustling metropolises like Atlanta, Dallas and Houston have house prices much less than one third of those seen in Melbourne and Sydney.

As a result of Australia’s very expensive property market, homeowners really notice any slight increases when interest rates are raised. In fact, such is the expense and percentage of the family annual salary that mortgage repayments devour, talk of interest rate drops and RBA’s 2.30pm announcement takes on unprecedented importance – many investment houses will run a ‘book’ on which way rates will move!

Following on from this in more recent times, is the general public feeling of utter helplessness when our major banks fail to pass on any rate cuts. While we have some relief now with low interest rates relative to days gone by (think 1990s when rates where high double digits), most projections show that interest rates will rise again and many people may start to feel stress from their mortgage, if the GFC is not already placing a strain on their monthly budget.

This article is designed to provide some helpful tips on how to beat rate rises and avoid mortgage stress.

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