Many borrowers (particularly investors) are mad, they have exposed themselves to large amounts of debt, just because at a moment in time rates are low, without sufficient consideration for future cost of debt. Rates will rise again. Interest only and investment loans are case in point. Lenders borrowing capacity calculators have changed significantly, making it more difficult for investors to continue to refinance or roll over their loan to continue their typical 5-year interest only period on their loan. Many investors who have too much debt with repayments converting to principle and interest repayments in the coming 3 years, could certainly face hardship as their repayments will end up doubling. Forced sales could ensue. There could be a price correction in some areas due to this, maybe then things could become a tad bit more affordable in some areas. Some owner occupiers, suffer from the Jones factor, they want to live in a better area because their friends or parents do, rather than what they can really afford longer term, so they stretch themselves too thinly, becoming a slave to debt. This “I want” attitude, a particular trademark of the millennial generation and Y generation’ which will inevitably lead to difficulty in affording the debt they have, is their own fault.
Global ratings agency Moody’s says Australia’s housing affordability crisis is worsening, with record-high debt levels exposing borrowers to greater risk of defaults