He was unable to return to work due to permanent lower back pain and a shoulder full of metal, but still owes about $83,000 on his mortgage.
As for moving, there is an emotional connection to the place. His wife died four and a half years ago and her ashes are interred on the property.
Since rates started to rise, most of the attention has been on homebuyers who have recently borrowed to the max, but the rate hikes are starting to have a broader impact.
The pain will hit next year, when borrowers who made record-low term deals early in the pandemic will have to refinance at higher rates.
Julie DeBondt-Barker, director of the Property Home Base and a neighbor of Eagle’s, said stories like his may become more common in the next year.
“If interest goes up to 6 per cent, that will mean some people will have to sell. It hasn’t happened yet, but it will all be on the radar next June or July,” she said.
“It’s not just first-home buyers, (it’s) anyone who bought a home during the boom and stretched themselves on a fixed-rate loan.”
At the same time, potential homebuyers cannot borrow as much as they could six months ago to buy the homes they want, and are left with a choice between smaller homes or further afield, she said.
Canstar financial services group director Steve Mickenbecker said rates had now risen 3 percentage points since April. Rising rates have effectively wiped out the repayability buffer used to stress test households borrowing at record low rates, pushing them and lenders into uncharted territory.
Mickenbecker expects refinancing needs to increase next year as households try to ease mounting repayment pressures.
He pointed to RBA data showing a 0.51 percentage point difference in interest rates paid by existing borrowers compared to new customers, which could result in savings of $155 a month on a $500,000 30-year loan.
“The RBA talks about people who have built up their savings buffer…but some are just a little bit ahead, some are not at all. More recent borrowers haven’t had a chance to succeed…and they’re also starting to see stocks fall,” he said .
AMP Capital chief economist Shane Oliver said buyers of homes in recent years, particularly first home buyers, had borne the brunt of the rise in the cash rate.
“Everyone is going to start feeling the stress, but it’s not going to affect everyone in the same way … over the last five years, what’s really come in is first-home buyers or owner-occupiers, who’ve taken on higher Debt levels, who will be stretched the most,” he said.
While mortgage stress has risen, Oliver said non-performing loans had not yet generally risen. Most borrowers are making their loan payments, and most will cut spending elsewhere to continue doing so.
However, he expects the number of forced sales to increase significantly next year, but remain limited, as higher interest rates affect borrowers, the end of lower fixed rates and a likely rise in unemployment further weigh on household budgets.
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