Australia has the world’s highest rate of mortgage pain
Australians are forced to allocate a higher percentage of income to mortgage repayments than any other developed nation
Australians are forced to allocate a higher percentage of income to mortgage repayments than any other developed nation
Homeowners in Australia allocate a higher share of their income to mortgage repayments than any other developed nation, according to the International Monetary Fund (IMF). In its Global Financial Stability Report released this month, the IMF says Australian households allocated 15% of income to home loan repayments in December 2022, the highest level among all advanced economies.
Although official interest rates in Australia are slightly lower than other developed countries, we have the second highest level of household debt in the world – primarily due to high house prices – and 75% of our home loans are on variable rates. This makes Australia different to many other advanced countries where longer fixed-term home loan arrangements are the norm.
The Reserve Bank of Australia (RBA) says Australians are keeping up with home loan repayments but are cutting spending in other areas to cope with higher interest rates and inflation. In a report released this month, the RBA said some homeowners were taking on extra work, or drawing down on savings buffers, to cope with the higher costs of living. “Many households continue to face a squeeze on their budgets as high inflation and the increase in interest rates over the past 18 months have reduced available income after essential expenses and housing costs. Consistent with this, consumer sentiment remains near historically low levels, particularly for owner-occupier mortgagors,” the RBA said.
Home loan repayments for most borrowers have increased by between 30 percent to 50 percent since the RBA began hiking interest rates in May 2022. “Borrowers with high debt relative to their income – including some new mortgagors and first home buyers – have been particularly affected as their scheduled loan payments relative to income have increased by a greater amount than those of other borrowers,” the RBA said.
However, very few Australians have fallen behind on their loan repayments or sought temporary loan modifications from their lenders. “In the event that more borrowers became unable to service their loans, only a very small number would be in negative equity on their mortgage. As a result, losses to lenders are expected to remain low and manageable.”
The IMF noted that supply constraints have contributed to house prices remaining above pre-pandemic levels in many countries, thereby “complicating central bank efforts to bring inflation back to target”. This is certainly the case in Australia, with the latest inflation data released by the Australian Bureau of Statistics yesterday showing rents and new housing purchases, along with petrol prices, were the biggest contributors to the 1.2% rise in inflation over the September quarter.
CoreLogic Research Director Tim Lawless draws a direct correlation between the surprisingly strong rebound in home values across most markets in 2023 with the low number of homes for sale. The latest CoreLogic data shows that during the September quarter, home values grew most in Adelaide at 4.3%, Brisbane at 3.9% and Perth at 3.6%. Mr Lawless said: “The three capitals recording the highest capital gain each have advertised supply levels that are around 40% below their previous five-year average. Advertised supply levels across Hobart, where values are still trending lower, have been holding at above-average levels since June last year and were almost 40% above its five-year average.”
Most experts say the rate hiking cycle in Australia is coming to an end as inflation continues to trend down. Demand in the property market appears set to remain strong, with the usual seasonal increase in the number of homes for sale in Spring failing to put any meaningful brake on price growth. A high rate of migration over the next five years is likely to exacerbate demand, while new housing starts remain suppressed due to high construction costs and labour shortages.
If you have a good credit score and always make timely repayments, your lender may not want to lose your business and might offer you an interest rate discount or perhaps waive some fees.
If you’ve managed to build up some equity in your property, you may be in a position to refinance your home loan with another lender on a lower interest rate.
By making extra home loan repayments on top of your obligations, you may be able to shrink your home loan principal and therefore reduce the interest charged on your mortgage.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
A rural retreat with a side hustle opportunity, Pecan Manor Farm near Byron is an idyllic slice of the tree change pie.
High in Byron Bay’s coveted hinterland there is a hidden estate with more than just a charming homestead on offer. Pecan Manor Farm is a 40ha parcel of lush rolling grounds with expansive grazing lands, a dam with a private pontoon – and a thriving pecan plantation.
The original homestead was first built and owned by the Toohey brothers, who later went on to establish the iconic Tooheys Beer Company. In 2013, the property was sold to the Hogan family, who significantly renovated the home. It changed hands again in 2021, with the current owners further transforming the property.
With sandstone features, manicured hedges and a meandering driveway through established trees, Pecan Manor Farm is, in a nut shell, an enviable tree change property only half an hour from one of Australia’s hottest beach getaways.
Listed with McGrath Byron Bay Agents Tezu Harrison and Nick Dunn, the unique property at 204 Tooheys Mills Rd, Nashua is on the market with price expectations of $8 million.
“It’s a beautiful pecan estate that is so private. You drive in through a pecan forest almost and arrive up to the top of the property to discover a completely renovated old school Federation home. It’s probably one of the most beautiful 99 acres I’ve ever seen, because there are so many different aspects to it,” Mr Harrison said.
Framed by some of the region’s most impressive scenery, the grand Nashua landholding is near Tintenbar, and is 18kms to Lennox Head or 25kms to the popular beaches of Byron.
Inside the large family-friendly home, the main wing houses a choice of everyday living spaces including an open plan dining and family room, the contemporary kitchen and a separate lounge or media room.
At the heart of the footprint, the kitchen has a suite of NEFF appliances and a freestanding island bench. Both the dining and lounge areas spill out onto a full-width deck, taking in the sweeping district views and pool.
While one bedroom has an ensuite and personal deck, it’s the main bedroom that is a retreat in every sense of the word. Separated via a gallery-style hallway, the primary suite is its own wing with a large deck, a bath ensuite overlooking the lush landscape, and a walk-in wardrobe.
Thanks to the multiple alfresco spaces, there is a place for everyone in all seasons, especially by the pool either on the timber sun deck or in the cosy cabana complete with its own fireplace.
Guests can stay with plenty of privacy in the freestanding barn, or the extra self-contained space could be used as a short term rental or office generating additional income. Aptly named The Barn, this bonus accommodation features a full kitchen with breakfast bar, a bathroom, living area and separate bedroom.
Throughout the home there are high ceilings, timber floors, intricate chandeliers, ducted air-conditioning. The property also has six large machinery sheds, offering ample scope for further agricultural pursuits.
Flowing along the property’s edge, Skinners Creek further sets the scene, while the location delivers the best of both worlds – Tintenbar General Store and local school are just 10 minutes away, while the popular Harvest Newrybar café is a 15-minute drive with Lennox Head and Ballina/Byron Airport also easily accessible.
Pecan Manor Estate is listed with Tezu Harrison on 0448 000 234 and Nick Dunn on 0448 301 111 of McGrath Estate Agents Byron Bay and is on the market with a price guide of $8 million.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.