Protect Yourself : Struggling with the mortgage? Get Out Now

Those homeowners feeling the pinch from rising interest rates and living costs need to put their house on the market now because things are about to get much worse, Wizard Home Loans founder Mark Bouris said.

He said inflation pressure and rates rises had made the repayments calculations people made when entering into a home loan only a few years ago were now not worth the paper they were written on - and urged homeowners to "get their heads out of the sand" and realise the trouble around the corner.

And anyone hoping today's tax cuts would ease their pain has more bad news coming, with reports that inflation has already eaten up more from family budgets than the Government is giving back.

The Reserve Bank board holds its monthly meeting on interest rates today, but most economists predict rates will remain steady.

Worse to come

But despite that slight reprieve, Mr Bouris said there was a "major problem looming" for struggling homeowners over the next few years. "I know this because of what I hear in the industry and what my customers are telling me every day.

"Interest rates have gone so high in the last few years that ... homeowners really are battling. And there's worse to come. Much worse."

Mr Bouris said people who singed up for a fixed loan three or four years ago - before rates shot up - are about to get a shock. These homeowners will soon be switched from their introductory fixed rate to a much higher loan.

"They have no idea what is about to hit them," he said.

He also said that interest rates have risen so much in recent years that the calculations once applied to assess someone's capability to pay back a loan "are now nonsense".

"Mums and dads need to take their heads out of the sand and start looking at the next six months, because these high interest rates could last for another year or so. There's only so long some people can hang on."

Tax cuts eroded

The Federal Government's promised tax cuts arrive today, putting an extra $51.54 back in the pockets of the average workers. But there is little cause for celebration for most families.

The Daily Telegraph reports rising inflation has gouged $86 a week out of the average household budget, meaning that the tax cuts would have to be $34.61 a week higher if they were to leave a typical family with the same disposable income they had when the cuts were announced on October 14 last year.

If that family drives two cars they will an extra $18.50 a week on top of that to cover increased petrol bills. The paper's calculations show the three interest rate rises that occurred after the tax cuts were promised have cost the average family $38.25 a week.

Childcare fee rises due this week will cost a family with two children, one in long day care, another in after school care, $23.40 a week extra if they use three days care. Grocery price rises are costing families a further $6 a week.

This story was found at: http://www.news.com.au/business/money/story/0,25479,23950554-5013951,00.html