Thousands of interest-only homeowners in Queensland face a looming mortgage crunch

first_imgTens of thousands of Queensland borrowers are facing a looming mortgage crunch.TENS of thousands of Queensland property investors are facing unexpected jumps in mortgage repayments as $6 billion worth of interest-only loans in the state reset at higher rates over the next few years.In research conducted exclusively for The Courier-Mail, independent consultant Digital Finance Analytics (DFA) estimated the monthly repayments on the average Queensland interest-only mortgage of $230,000 would increase by more than $600 to $1425 as borrowers were forced to start repaying the principal on their home loans.Tighter lending standards have resulted in a reluctance among banks to dish out interest-only loans, meaning borrowers who need to refinance might not qualify for a new interest-only loan or a principal and interest loan with a lower interest rate.GET THE LATEST REAL ESTATE NEWS DIRECT TO YOUR INBOX HEREInterest-only loan holders are facing higher mortgage repayments. Picture: iStock.DFA has estimated the number of interest-only loans in Queensland and then applied the latest lending criteria to establish whether existing borrowers would qualify.It found the majority of interest-only loans among Queensland borrowers were held by investors, with about 43.5 per cent of outstanding investor loans interest-only.DFA estimates $6 billion worth of interest only loans in Queensland are failing current lending standards, which equates to around 25,000 households or more than 10 per cent of property investors in the state.DID SOMEONE SAY POOL PARTY?HOW HOMEOWNERS CAN SAVE PLENTYHERITAGE-LISTED BRISBANE BUILDING SOLD AT AUCTIONDigital Finance Analytics estimates about 25,000 Queensland households are facing a mortgage crunch. Image: AAP/Dave Hunt.More from newsParks and wildlife the new lust-haves post coronavirus21 hours agoNoosa’s best beachfront penthouse is about to hit the market21 hours agoDFA principal Martin North said that meant many of those borrowers were in for a “nasty letter from the bank” over the next three to four years, with the problem likely to peak in the years 2020 and 2021 when most interest-only loans were up for review.“A lot of people will not know about this until the point they suddenly find the fixed period on their loan comes to an end,” he said.“Every interest-only loan has a reset review point, so you can’t avoid the review.”Mr North said there was a risk that a proportion of interest-only loans facing review would not be refinanced, resulting in properties having to be sold.“This is akin to the issues in the USA in 2005-2007 where loan repayments rose, creating significant issues for households, and of course ultimately the GFC” he said.Digital Finance Analytics principal Martin North.Mr North blames loose lending standards prior to the recent crackdown by the Australian Prudential Regulation Authority for the situation facing many interest-only borrowers.He said interest-only borrowers had four choices: they could try to extend the interest-only period, switch to principal and interest, try to renegotiate a better rate with their current lender, or try switching to a new lender.Thousands of Queensland property owners are facing jumps in mortgage repayments.It comes as investment bank UBS recently revealed about a third of new borrowers with interest-only loans did not understand how their mortgage worked.The broker, which surveyed more than 900 borrowers that took out a home loan over a 12-month period, said that only 25 per cent of respondents claimed to have taken out an interest-only loan — well below the official statistics of 35 per cent.The only plausible explanation, they said, was that “around one-third of interest-only customers do not know or understand that they have taken out an interest-only mortgage”.last_img

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