Dream home on pause for young family as mortgage stress takes hold

Shane and Emily are just one young Australian family feeling the squeeze.

Emily Harris and Shane Maslin with their boys. Sam, 3, and Harry, eight months, at their block of land in Mount Barker, South Australia, on Thursday. Picture: Matt Turner

Shane Maslin and Emily Harris hoped to build their dream home in the leafy Adelaide Hills, but a year after buying the land they’re selling up, victims of the mortgage stress hurting thousands of young Australian families.

Over the year the couple’s mortgage repayments on the 920sqm block in Mount Barker have increased by $600, the cost of construction became more expensive, and they had their second son, which meant Ms Harris wasn’t working.

Groceries doubled from about $400 to $800 a fortnight, and power bills, which were $0 as a result of their solar panels, went up $500 a quarter.

“As the rates went up, we didn’t want to sacrifice what we could build. So we decided we wouldn’t go through with the build until we could make our dream home. We didn’t want to build something we both weren’t excited about,” Mr Maslin said.

Mr Maslin, 34, and Ms Harris, 27, managed their repayments over the past year by pulling older son Sam out of childcare, taking about $390 a fortnight out of their budget.

“We could have lived with (the costs of childcare) but not very comfortably,” he said.

The middle-income couple also planned to send son Harry to childcare when Ms Harris returned to work, taking that cost up to about $430 a fortnight. Instead, Mr Maslin’s mum will look after the kids a few days a week and Ms Harris, an administrator at a real estate agency, will return to work part-time.

“We weighed up the costs of childcare … If we had to put the kids in childcare, it would have made Emily’s working days redundant. It would have cost what childcare is costing, so it wouldn’t make sense,” Mr Maslin said

As a self-employed mortgage broker, Mr Maslin also knew to refinance his mortgage to get a better deal, saving $250 a month.

Since he launched his business, Zest Financial Life, in 2019, it has endured the twin perils of Covid and the housing crisis. “Speaking to other brokers, this is one of the more challenging periods for the industry,” he said.

Economists say this group – families who purchased property in the past two years and are building their home from the ground up – are the worst-affected by mortgage stress. The other group is that of new first-home buyers who paid higher prices for property and borrowed larger amounts.

“People that bought recently will have paid high prices and will not have been expecting these very rapid increases in mortgage rates,”  Centre for Independent Studies chief economist Peter Tulip said.

“It’s not surprising that many of them are getting out (of the housing market). Rents are going up but nowhere near as much as interest rates.

“So if people were on the margin of deciding whether to buy or rent a year ago, they are probably regretting that decision and would be finding it much easier if they were renting.”

PropTrack economist Paul Ryan said there wasn’t much evidence of mortgage stress in the general population, which could mean people have managed to keep up with increased repayments, or that the signs of stress aren’t visible yet. “We’re in this wait-and-see period,” he said.

“People hit with financial stress can often muddle through for a short time. But over the long term, sometimes when there’s an unanticipated expense, like a car breaks down, it all falls down. It’s not on day one of higher interest rates that you expect people to throw their hands up.”