Jitters as increase hits home

ONE quarter of 1 per cent may not sound like much, but for Sonja and Arjen van den Bosch it represents $167 a month extra that they will have to find to pay their $800,000 mortgage.

ONE quarter of 1 per cent may not sound like much, but for Sonja and Arjen van den Bosch it represents $167 a month extra that they will have to find to pay their $800,000 mortgage.

The couple live in Coogee, in Sydney's east, with their two-year-old twins, and are willing to manage the burden of very large interest payments in return for a beautiful home and a beachside lifestyle. But the prospect of further interest rate rises concerns the family, who have already significantly reined in their spending habits.The family took out a substantial mortgage in 2005 when they bought two unrenovated duplexes for $1.6million.

But financial stresses soon followed when their budget for renovating the two properties blew out. At one point the family's mortgage was as high as $2m. They sold one of the duplexes in 2007 at a $100,000 net loss.

Mrs van den Bosch works four days a week running her own marketing consulting business, Twinlife Total Marketing Solutions, and her husband also works for himself in as a business consultant for ComActivity.

A significant proportion of the family income goes on mortgage repayments, which total $3600 per month at a variable interest rate of 5.04 per cent.

With such a high mortgage, even small rate rises have a large impact on the family.

"Before we had kids we went out for dinner four or five times a week, we didn't really know what anything was costing in the shops," Mrs van den Bosch says.

"In hindsight, we were actually living a ridiculous life and wasting a lot of money. Now we eat at home, go out for dinner once a week, and shop at Aldi."

Mrs van den Bosch says the family would make many financial sacrifices before they would consider downgrading their home or reducing their mortgage.

"I'm sure we'll manage, because we are just so determined to hang onto our home," the mother-of-two says.

But Mrs van den Bosch is not confident the Reserve Bank has made the right decision in raising interest rates just as the Australian economy has stabilised.

"The economy has only just started to recover, so why would you suppress that again?" she says. "I think personally that it's not very good for consumer trust."