With interest rates set to rise further, many borrowers will struggle to meet their mortgage payments while some face the prospect of losing their home altogether.
But by talking to your lender or another financial institution before it’s too late, you can avoid such a disaster - you could even walk away with better deal.

While the situation in Australia is not as bad the US, where foreclosures are up 68 per cent and the housing market has hit rock-bottom, it is getting worse. In the US, the housing market woes have even given rise to a new phenomenon known as the home foreclosure bus tour.

Rather than dwell on the negatives, US real estate agents have begun offering such tours as a way to keep their trade ticking over.

The tours are happening all across the country.

One recent tour in the Pismo Beach, California, where foreclosures are at a 20-year high, had 40 aspiring homeowners taken on a four-hour tour of 10 houses - all for sale at cut-price rates, ABC news in the US reported.

While the situation in Australia is not nearly as grim, with interest rates at an 11-year high and set to rise further, many borrowers here are undoubtedly facing an uncertain future.

Foreclosure rates, or repossessions as they are called in Australia, have been on the rise and higher interest rate rises are likely to make matters worse.

Figures from the Reserve Bank of Australia (RBA) show there were 5,368 applications for repossession in NSW in 2006, equivalent to 0.23 per cent of the number of private dwellings in the state, with 3,642 writs of possession granted.

The ratio of writs to applications - at around two thirds - was higher than in the previous two years and was higher again for the first eight months of 2007, the RBA said.

But it doesn’t have to go that far, said Phil Naylor, the chief executive with the Mortgage Finance Association of Australia (MFAA).

“The first thing is to act quickly, to either go back to the lender or broker who organised the loan for you, explain your circumstances and see whether you can have your loan arrangements amended to assist you to continue to service the loan.”

“It’s not in the lender’s interest to have customers falling over, so they generally will try with all reasonable loan circumstances to set some arrangement that the customer can agree with.”

But it’s not the end of the world if the current lender won’t come to the party, Mr Naylor said.

“There may be other lenders who are prepared to assist.”

“Refinancing is possible, and even though there has been some publicity about some hurdles, in general, providing you get good advice, and you understand the terms of the loan and the terms of the exit and entry fees and so forth, you may be able to get another loan that better suits your circumstances.”

Another alternative is for the borrower to access some of their superannuation in order to get loan repayments back on schedule.

Borrowers can do this either by applying to the Australian Prudential Regulation Authority for the early release of some of their superannuation benefits on compassionate grounds or, if they are in receipt of a Commonwealth income support payment, by applying directly to the trustees of their superannuation fund on the grounds of severe financial hardship.

As far as repossession is concerned, Mr Naylor said it is very much a last resort, and lenders don’t like to do it.

“It doesn’t happen very often, and even when it gets to that stage lenders (in Australia) prefer the borrower to be able to sell the property voluntarily and … get the best price.”

The RBA said that while selling up was usually a difficult decision, research suggested that voluntary sales often achieved a 15 to 20 per cent higher price than mortgagee-in-possession sales.

“It can be stressful if you find yourself unable to meet your mortgage repayments and you’re in danger of defaulting,” Mr Naylor said.

“But there is almost always a solution. You just need to talk to the right people at the first sign of difficulty.”

AAP