The Boom That's Breaking Us (part One)

The Age

Wednesday March 5, 2008

Miki Perkins

ELISE Gallagher is judicious with her money. It took her 10 years to save for a house deposit while she was renting and she is in the enviable position of having no credit card, car loan or HECS debts.

Three years ago she bought a two-storey, brick townhouse in Coburg, in Melbourne's north, and chose a mortgage with a fixed, rather than variable, interest rate of 6.5%.

Yesterday, as the Reserve Bank raised its official cash rate to 7.25% and a collective groan went up from property owners around the country, the 33-year-old breathed a sigh of relief. Her decision had paid off.

"It gives me the security of knowing that I only have a set amount of money going out every month," she said. "The variable option worried me because if rates went up I might have faced problems with the repayments. I don't think I could enter the housing market now, and if I did I'd be living in the outer suburbs."

Ms Gallagher, a clinical nurse specialist at the Royal Children's Hospital on a salary of about $55,000, borrowed $260,000 from a bank. Servicing a mortgage on a sole income means putting money aside for bills and planning ahead, she said.

And next February, when her three-year fixed-rate contract expires, she will have to decide whether to opt for a variable interest rate. "I will probably chose a fixed rate again." -- MIKI PERKINS

© 2008 The Age

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