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Mortgage stress: who’s feeling it the most?

Maureen Jordan
Thursday, September 27, 2018

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When Aussie mortgage holders were recently asked how they felt about their home loans, 56% confessed that they were feeling the burden of their mortgage, which limits their lifestyle. While a majority is feeling the pain, 44% perceive their mortgage as a benefit. 

The study also found that almost one in 10 Aussie mortgage holders are simultaneously renting and investing in property, which Gateway Bank sees as signaling a shift towards alternative routes of entering the property market.

Paul Thomas, CEO of Gateway Bank, maintains that these findings reflect the consistent increase in household debt across the country: “In the pursuit of getting their foot into the property market, some Aussies have become over-indebted, leading us to record high household debt-to-income ratios of 189%. Add to this the steep decline in household savings, which is currently at 1%, and you have yourself a recipe for mortgage stress.” Thomas said. 

The results also indicate a shift towards an alternative means of property ownership – rent-vesting. Almost one in 10 of those surveyed were renters who also owned investment properties. Half of these rent-vestor were Millennials 38% were Gen X and 10% were Baby Boomers.

Thomas attributes the popularity of rent-vesting to increasingly strict lending restrictions and a desire for more affordable routes of property investment but warns people against entering down the path without the proper knowledge required to succeed: “The Australian property market is flatlining for the first time in years and lending restrictions are tighter than ever before, so savvy Aussies are looking for other ways to get a foothold into the great Australian Dream.

“It seems that for almost 10% of Aussies, rent-vesting has presented an opportunity to enter the property market. However prospective rent-vestors should be wary before going down this path, as it does require a lot of consideration. When we look at data from our study this year, rent-vestors are under a greater deal of stress (65%) compared to the general mortgage holder population, which is just a small indication of the challenges presented by rent-vesting,” Thomas concluded. 

And which city houses the most mortgage stressed Aussies? Adelaide residents topped the stress list, with 63% of residents considering their home loans to be a burden. Sydneysiders are more chilled out (54%) than Melbournians (58%) and Darwinians 61%, and even more chilled out than mortgagees in Brisbane (61%) and Perth (62%)!

When asked to comment on these statistics, Peter Switzer, founder of Switzer Home Loans, said: “The concept of mortgage stress is relative to what in your life was given up to own a house. I would argue that modern generations have lived through a period of greater materialism compared to older generations so the sacrifices involved in paying off a mortgage could be harder for them to digest. It doesn’t mean that they are unable to pay off their home loan, it might just be emotionally harder to do so.”

Published: Thursday, September 27, 2018


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