When you first take out a home loan, whether it’s for your own home or as an investment, you start off with the expectation that you’ll be able to make repayments relatively easily – whether that’s from your salary or from rental income. Nobody deliberately (I hope!) takes on a mortgage that they’re going to have trouble repaying. But then interest rates rise – like they’ve done pretty regularly here in the last year – and it’s a little scary how quickly you can get out of your depth and start to have problems making your repayments.
And that’s what they call mortgage stress. You may have noticed that the term mortgage stress seems to come up more and more often in the media these days, and it affects a wide range of people, including home owners, investment owners and the tenants who are living in the investment properties, too.
For example, a recent report from the Herald Sun pointed out that there are hundreds of tenants who are being told to leave houses and units because the owners are under mortgage stress and default on their loans – and when a bank seizes a property, it often means the tenants are evicted with only a very short period of notice. Reports are that some of these tenants are being forced to move within a fortnight, although the legal minimum is 28 days – still a pretty short time to suddenly have to find a place to live.
A lot of the mortgage stress seems to be being experienced by first home owners who have bought into the market recently – and probably paid more than they had hoped to, given rising prices across the country. Being at the upper limit of their repayment capabilities from the outset, they are now having difficulty as interest rates, and therefore repayments, rise.
Unfortunately, there’s probably not much hope in sight that interest rates will fall – they’ll probably go up instead – so mortgage stress might get some more headlines in the near future.
Possibly Related Posts:
- House prices rise and fall across Australia
- Mortgage news with election looming
- No interest rate rise after August Reserve Bank meeting
- Inflation figures may increase our mortgage rates
- Do we choose mortgages by interest rate alone?
