19 February 2020
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Mortgage stress: who's feeling it the most?

When Aussie mortgage holders were recently asked how they felt about their home loans, 56% confessed that they were feeling the burden of their mortgage, which limits their lifestyle. While a majority is feeling the pain, 44% perceive their mortgage as a benefit. 

The study also found that almost one in 10 Aussie mortgage holders are simultaneously renting and investing in property, which Gateway Bank sees as signaling a shift towards alternative routes of entering the property market.

Paul Thomas, CEO of Gateway Bank, maintains that these findings reflect the consistent increase in household debt across the country: “In the pursuit of getting their foot into the property market, some Aussies have become over-indebted, leading us to record high household debt-to-income ratios of 189%. Add to this the steep decline in household savings, which is currently at 1%, and you have yourself a recipe for mortgage stress.” Thomas said. 

The results also indicate a shift towards an alternative means of property ownership – rent-vesting. Almost one in 10 of those surveyed were renters who also owned investment properties. Half of these rent-vestor were Millennials 38% were Gen X and 10% were Baby Boomers.

Thomas attributes the popularity of rent-vesting to increasingly strict lending restrictions and a desire for more affordable routes of property investment but warns people against entering down the path without the proper knowledge required to succeed: “The Australian property market is flatlining for the first time in years and lending restrictions are tighter than ever before, so savvy Aussies are looking for other ways to get a foothold into the great Australian Dream.

“It seems that for almost 10% of Aussies, rent-vesting has presented an opportunity to enter the property market. However prospective rent-vestors should be wary before going down this path, as it does require a lot of consideration. When we look at data from our study this year, rent-vestors are under a greater deal of stress (65%) compared to the general mortgage holder population, which is just a small indication of the challenges presented by rent-vesting,” Thomas concluded. 

And which city houses the most mortgage stressed Aussies? Adelaide residents topped the stress list, with 63% of residents considering their home loans to be a burden. Sydneysiders are more chilled out (54%) than Melbournians (58%) and Darwinians 61%, and even more chilled out than mortgagees in Brisbane (61%) and Perth (62%)!

When asked to comment on these statistics, Peter Switzer, founder of Switzer Home Loans, said: “The concept of mortgage stress is relative to what in your life was given up to own a house. I would argue that modern generations have lived through a period of greater materialism compared to older generations so the sacrifices involved in paying off a mortgage could be harder for them to digest. It doesn’t mean that they are unable to pay off their home loan, it might just be emotionally harder to do so.”

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