INDUSTRY NEWSNationalReal Estate News

Financial strain: 15 per cent of homeowners fear selling amidst rising costs

Distressed property sales could be on the rise according to new research which shows 15 per cent of homeowners are worried they might have to sell their property due to the rising cost of living.

According to a Finder survey of 1073 respondents, including 627 homeowners, one in seven people (15 per cent) are afraid they may have to sell their home.

Nationwide, that’s equivalent to 515,000 households who are financially stretched to the limit.

The new analysis comes after the Australian Bureau of Statistics last week released the latest lending indicators, showing the value of new owner-occupier loan commitments dropped 1.9 per cent in July to $15.6 billion, while the value of new investor loan commitments remained relatively stable, dropping jus 0.1 per cent to $8.6 billion.

Refinancing to new lenders also reached a record high, up 5.4 per cent in July to $21.5 billion. 

Source: ABS Lending Indicators, external refinancing only, seasonally adjusted data.

The Finder research also showed younger homeowners from Gen Z and Gen Y are three times more likely to be stressed about the prospect of selling their home than Gen X or Baby Boomers.

“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 had locked in ultra low interest rates for a couple of years – so some people are paying 3 or 4 more percentage points on the mortgage overnight.

“Many just can’t find potentially thousands of dollars more each month to service their home loans.”

Finder’s Consumer Sentiment Tracker found that 39 per cent of homeowners struggled to pay their mortgage in August – up from 26 per cent 12 months prior.

“Many borrowers have already pulled back on all non-essential spending as they have no money left to contribute to their mortgage,” Mr Whitten said.

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

Real Estate Institute of Australia (REIA) President Hayden Groves said the latest ABS lending statistics indicated interest rate hikes need to cease, especially with inflation also dropping to 4.9 per cent in July.

“There’s little doubt Australians are struggling in the face of rising interest rates and inflation,” he said.

“The latest ABS CPI indicators show that inflation is easing, further cementing our view that market inflationary pressures have settled down.”

Mr Groves said the lending figures showed the value of owner-occupier housing loan refinancing between lenders rose 4.9 per cent to a new record high of $14.6 billion in July. 

“Anecdotal feedback suggests this may be partly driven by a portion of refinancing applications lodged before lenders ended attractive cashback offers on 30 June,” he said.

“Of interest, the value of new investor housing loan commitments in Queensland rose 6.8 per cent to $1.9 billion indicating strong growth in that state, giving hope of an easing of housing supply constraints” he said.

Canstar Finance Expert Steve Mickenbecker said the Reserve Bank of Australia would likely keep interest rates on hold in September, but many borrowers were still to experience rate increases.

“Fixed rate lending rocketed up two years ago when rates were around two percent, and every month for the next year or so a mass of borrowers will move to a variable rate with repayments lifting by around 60 per cent,” he said.

“Fixed rate borrowers converting to variable over the next year will have to embrace refinancing as the key coping mechanism for the massive one-off repayment increase. 

“This will ensure that refinancing activity will continue to boom from its $21.5 billion record in July, keeping the banks fully occupied as new lending volumes contract.

“Interest rate rises are the great motivator for refinancing as borrowers do what they can to offset Reserve Bank rate increases.

“Not only is demand for refinance on the rise, but banks have demonstrated their appetite to take on borrowers from their competitors, thankfully suggesting that there is still a healthy population of borrowers in sound financial shape and able to refinance.

“There is likely to be a lower rate for almost every borrower who has not negotiated their interest rate in the last two or three years, and if they are in solid financial shape they should be joining the rush to the bank for a better deal. 

“In the absence of growth in new lending, banks are chasing hard for refinance business.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.