Selling assets to stay afloat
Mortgage costs hit hard
An alarming number of mortgage holders are resorting to drastic measures such as selling personal belongings to cope with the financial strain of rising home loan repayments.
Almost half of Australian mortgage holders have considered selling their home, personal items, valuables, investments, car or business to offset the strain, according to new research from Canstar. A survey of more than 800 mortgage holders found the consideration had turned into reality for 23 per cent of all borrowers.
The most common sacrifices have been furniture, electronics and collectibles, with nearly 32 per cent selling these to alleviate financial pressures. Family homes are the second most common asset sold, with 28 per cent of mortgage holders choosing to relocate and 22 per cent downsizing or moving in with family.
A further 14 per cent chose to sell their homes and rent rather than pay a mortgage.
One-fifth of mortgage holders included in the data had pawned off jewellery and other valuables in a bid to pay the rising repayments. Meanwhile, 20 per cent have turned to getting additional income.
The Canstar research also found 19 per cent of respondents had resorted to selling investment properties or other investments such as shares, ETFs, commodities or cryptocurrency to maintain stability.
Just 12 per cent chose to sell their vehicles to get by, while 4 per cent of respondents sold their business to cope.
“Even though the banks report only a relatively modest increase in home loan arrears, the strain of higher rates is taking its toll on a group of borrowers, with half considering selling belongings and 46 per cent of that group – which is close to one-quarter of all borrowers – following through and actually doing it,” Canstar finance expert Steve Mickenbecker said.
He said job loss, family break-up and illness could be a threat as repayments had risen by 62 per cent since May 2022.
“Coupled with high inflation (this) creates a big enough event for many borrowers to trigger a response like selling assets to make ends meet,” Mr Mickenbecker said.
“This is especially true for those who bought for the first time in the last four or five years.”
Mr Mickenbecker said financial crisis was a time for mortgage holders to re-evaluate their priorities, and parting with possessions could be a “perfectly logical reaction” if it meant holding onto the home.
However, he said it was worrying that people were choosing to sell their homes.
“This is long-term damage being done and the real pain of high interest rates,” he said. Mr Mickenbecker urged mortgage holders to consider refinancing to a longer- term contract or seeking short-term relief with lower repayments or an interest-only loan.
But he warns repayment relief measures could end up costing more and taking longer to repay. He also said some might not realise they had a redraw facility on their loan.