Housing crisis: One in seven homeowners worried they’ll be forced to sell due to rising cost of living — Finder

Rising interest rates are inflicting pain on stressed homeowners and investors, which could see a rise in distressed property sales this spring, new research reveals.

Rising interest rates are inflicting pain on stressed homeowners and investors, which could see a rise in distressed property sales this spring, according to new research by Finder.

A whopping 39 per cent of Aussie mortgage holders – equivalent to almost 1.3m households – said they struggled to pay their home loan in August, according to Finder’s Consumer Sentiment Tracker.

And two in five (40 per cent) of property investors are struggling to keep pace with soaring mortgage repayments and are worried they will have to sell their investment home.

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Finder’s latest survey also found one in seven sole property owners are worried they might have to sell their family home — the equivalent of 515,000 households.

The survey findings reveal one in seven homeowners are worried they’ll have to sell their own house. Picture: Property Real estate concept

Latest lending indicators from the Australian Bureau of Statistics (ABS) show that the average mortgage size (for owner-occupier dwellings) was $580,000 in June 2023.

With thousands of fixed-rate mortgages starting to expire, repayments for many buyers have begun to bite, jumping by thousands of dollars a month.

“Borrowers are experiencing a huge financial shock after a relentless climb in interest rates over the past year and homeowners weren’t coping,” Finder home loans expert Richard Whitten said.

“Many borrowers have already pulled back on all non-essential spending — they have no money left to contribute to their mortgage.”

“They feel like they’ve got little choice but to sell up or lose their home.”

Finder home loans expert Richard Whitten. Picture: Supplied

Mr Whitten urged borrowers to find out what hardship allowance they qualified for while they considered their options.

“Be upfront with your lender about your struggles before you start missing repayments,” he said.

“Your lender may be able to help you, with options like a repayment pause, a temporary reduction in your repayments, or financial counselling.”

A far greater number of property investors could look to exit the market this selling season as well, with the survey finding the equivalent of almost 900,000 investors that may have to put a property up for sale due to the rising cost of living.

“Two thirds (64 per cent) of people who own investment properties have an income under $80,000 per year, despite the assumption that property investors are high income earners,” Mr Whitten said.

“In fact, only the minority (7 per cent) earn more than $180,000 a year. While a property investor’s assets may be very valuable, they need cash to pay their mortgage each month.”

25 Connam Ave, Clayton is going to auction this week, one of more than 1000 homes going to auction in Melbourne this week.

“Investors will try to pass some percentage of rising costs on to tenants but that is a delicate balance. The rental market determines what landlords can charge, and tenants can’t simply absorb all of an investor’s costs.”

Median rents for houses saw growth in all capital cities, with Perth leading the way at a 14.6 per cent year-on-year increase, followed by Brisbane at 13.1 per cent, and Adelaide at 11.1 per cent, property data shows.

In 2020–21, over 2.2 million Australians owned rental properties, according to the Australian Taxation Office.

The research also found that the idea of home ownership is becoming increasingly out of reach for many Australians, with 31 per cent of non-homeowners surveyed saying they don’t think they will ever be able to afford a home.

The number represents a 10 per cent rise in sentiment since the same question was asked in 2020.

Source: Finder

It comes as Victoria’s property market is primed for a record start to spring that could kick off one of the biggest selling seasons in history, which may be fuelled partly by owners struggling with rates.

More than 3000 homes are scheduled to go under the hammer in the next three weeks in a buyer bonanza that’s starting with 1060 properties going to auction this week in one of the busiest ends to winter to date.

“There’s probably a proportion of those sellers who are people who have been hit hard by interest rates,” said PropTrack economist Anne Flaherty told the Herald Sun.

While first-home buyers who made their move in the past two or three years were the “most vulnerable” in this regard, she noted it was likely investment properties and family homes would also be among the forced sales.

Ms Flaherty said with “every reason” to expect auction numbers to continue to grow, late spring could become a “real test of the depth of buyer demand” that could pause or even reverse home price growth in recent weeks.

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Originally published as Housing crisis: One in seven homeowners worried they’ll be forced to sell due to rising cost of living — Finder