Queensland homeowners are cutting back on everything from childcare to kids sport just to stay on top of mortgage repayment increases, with others being urged to sell their pandemic “toys”.
With the Reserve Bank raising interest rates, a large group of mortgage holders coming off their fixed rate terms are about to feel the pinch.
With many now on or approaching the so-called “mortgage cliff”, two experts weigh in on what cash-strapped Queenland homeowners are doing to stay afloat, and what they might need to consider if they have nothing left to cut from their budgets.
Mortgage Choice Ormeau and Yarrabilba broker Deslie Taylor said she was seeing an increasing number of mortgage holders concerned about how they were going to make repayments, but that in some cases clients had also accumulated “caravans, boats, jetskis in a bid to keep up with the Joneses”.
“It is more about budgeting now,” Ms Taylor said.
“And in most cases, we find they can afford it, and another two rate rises if that happens, but they have to change their lifestyle.
“So they are ditching the luxuries like subscriptions and beauty treatments, or looking for better deals on things like insurance.
“They are cutting back on childcare, holidays and days out with the kids, and where they might have had their child in multiple extra-curricular activities, they are being forced to pick one.”
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Caravans became hot property during the pandemic lockdowns
Ms Taylor said confronting the reality was tough for some, with parental guilt often a factor.
But she said that the reality was a much bigger nightmare if the hard decisions were not made now.
“I fear for those people who won’t address their lifestyle expenses,” she said.
“They took out a home loan and then bought the toys, the caravans, the boats, the jetskis, they got a bigger car when interest rates were low.
“And they don’t want to sell them but we are telling them, you have no choice now.”
Ms Taylor said that while she personally did not think there would be a rush of forced sales, she had no doubt there would be an increase in distressed listings.
This Guanaba property is listed as a “Forced sale! Has to be sold!”
A recent report by SQM Research found that the number of distressed sales – which include those by owners struggling to pay their loans – have increased by more than a quarter annually in some states.
The bank has moved on this Harriston unit, with it listed as a “mortgagee sale by public auction”
Queensland had the highest amount of distressed listings at just over 2000, but it was down from about 2200 a year ago.
Two partly completed houses at Burpengary East are listed as a ‘mortgagee sale’ after the builder went bust
Ms Taylor said people needed to get out of the mindset that it was not okay to take a step back.
“People need to be brutally honest about their budgets and spending because if you look at historical rates data, where we are at now is the norm,” she said..
“It is okay to downsize. You don’t want your mortgage to become a ball and chain.”
Canstar’s editor-at-large Effie Zahos echoed that advice and suggested that struggling borrowers think outside the box.
“There is only such much you can cut back and only so much in the toolbox,” she said.
“You either spend less or earn more but there are only so many side hustles.
“Can you rent a bedroom? Have you looked for better deals on utilities?
“Maybe you could rent it out and move home, or somewhere cheaper.”
Canstar’s Effie Zahos. Picture: Tim Hunter.
Ms Zahos said that if a mortgage holder found themselves in dire straits, there was also some “emergency” strategies that could be deployed, including going to interest only or extending the term of the loan.
“The banks have ways,” she said. “During the pandemic when people were losing jobs, they were able to temporarily hit pause on repayments.
“And talk to your bank as it is far better to have an exit strategy than be forced into one.
“It won’t be like this forever but it is about what you can do to push through this.”