BRUCE BRAMMALL: Are you really to blame for your own mortgage pain?

Australian mortgage holders are fine. Apparently. The Reserve Bank of Australia says so.

And, statistically at least, it has a point. Despite interest rates climbing again this year, mortgage arrears remain low.

Fewer than 2 per cent of variable-rate owner-occupiers have a cash-flow shortfall, meaning their income does not cover both scheduled mortgage repayments and essential living expenses.

The median borrower also has enough sitting in offset or redraw to cover more than a year of repayments.

So, by that definition, we’re fine.

Although I suspect a few million mortgage holders might like a considerably broader definition of the word.

Because there is “fine”, and then there is the version of fine that means the mortgage has been paid, but almost everything else has been quietly pushed aside to make sure it was.

A holiday disappeared. An ageing car now must survive another year. Extra superannuation contributions clipped. Emergency savings account shrinking rather than growing.

Dinner out becomes takeaway. And takeaway morphs into leftovers in the fridge.

Nothing has collapsed. No repayment has been missed. The bank is happy. But the household may not feel particularly fine.

Being able to afford your mortgage is not quite the same thing as being able to afford your life.

That distinction rarely appears in the official numbers. A borrower who makes every repayment on time is counted as coping, even if doing so requires abandoning every other financial goal.

That may be evidence of resilience, but it is not evidence of comfort.

There is, however, another uncomfortable side to this argument.

Perhaps the problem is not entirely what interest rates have done to our mortgages, but what we allowed our mortgages to become.

Not all, but probably too many Australians have developed a backwards way of deciding what they can afford. We ask the bank.

If a lender says we can borrow $900,000, that figure quickly stops being the maximum . . . and becomes the Budget.

The property search filters move upwards. The extra bedroom becomes essential. The slightly better suburb becomes justifiable. And the repayments work, provided interest rates stay friendly, incomes continue uninterrupted and there are no expensive surprises.

Which, as financial plans go, is optimistic.

The better question is, “How much debt can I comfortably carry while still having the life I want?” A very different calculation to “how much can I borrow?”

A mortgage at the maximum you can borrow

A mortgage that worked at 3 per cent but stressfully consumes your life at 6 per cent was never particularly comfortable. Cheap money simply made it look that way.

I’m not suggesting borrowers should have predicted every rate rise. Few people could have, and many younger buyers faced a brutal choice between borrowing heavily or being locked out of the market altogether.

But a home loan still needs some slack built into it.

Affordability should include more than rates, groceries and electricity. It should leave room for holidays, repairs, investing, retirement savings, a period without work and, occasionally, doing the things that bring joy to life.

Banks have servicing calculators. Families have lives. The two calculations are not the same.

This matters whenever rates fall again, too. Lower repayments will feel like permission to upgrade the car, renovate the kitchen or otherwise allow spending to expand back into every available dollar.

A better response would be to use the new funds to protect yourself. Build the offset. Restore the emergency fund. Restart the super contributions. Make sure the next financial shock is an inconvenience rather than a crisis.

Because financial resilience is not merely the ability to absorb pain. It is having enough room that every change in interest rates does not force a rewrite of your life.

Perhaps the RBA is right. Most mortgage holders are fine. They are making their repayments. They are not in arrears. The house has not been repossessed.

But that is a pretty low bar for financial success.

A good mortgage is not simply one you can keep paying when rates rise. It is one that still leaves enough room to live.

Because if every spare dollar is required to keep the roof over your head, you might own the house.

But it reads more like the house owns you.

Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and a mortgage broker. bruce@brucebrammallfinancial.com.au