June 14, 2006 HOMEOWNERS would have difficulty meeting mortgage repayments if interest rates rose by 1 per cent and many borrowers say their mortgage is now worth more than their home, a survey has found.
A survey of 1057 NEWS.com.au readers found one in three homeowners thought the value of their property had fallen over the past 12 months.
Of those people, almost 1 in three thought the current market value of their home was less than the loan on the property – or they held 'negative equity'.
"We bought our house 18 months ago. If we had to sell tomorrow because of the rate rises, we would get less for the house and I doubt that the price we would get now would cover what we owe on the mortgage," said one respondent.
The survey of readers was conducted by polling firm Coredata and NEWS.com.au on June 5 to 9.
"Having unfortunately purchased my home at the top of the property boom in 2003, I am now in the situation of having negative equity in the property," said another reader.
"The current value of my home is LESS than the amount owing on my mortgage. Should I not be able to keep up repayments, I stand to loose a considerable amount of money through the forced sale of my home."
The pessimism about the property market is high. A whopping 42 per cent expecting house prices to fall, up sharply from 33 per cent in a February survey. Just 24 per cent of respondents expected house priced to rise over the next quarter.
Several readers fear a rise in interest rates. Of those people surveyed, several people, or 58 per cent of borrowers expected to have significant difficultly in meeting loan repayments if rates were to rise by 1 per cent.
Property investors more than owner-occupiers fear higher interest rates the most, with 34 per cent of investors saying they would be forced to selling their properties if interest rates rose by 1 per cent.
About 40 per cent of those with owner-occupier or investment mortgages said a rise in interest rates in May to a five-year high had already made existing mortgage payments more difficult.
Of owner occupiers, almost one in five - or 17 per cent - said they would be forced to sell their homes if rates rose by 1 per cent.
Reflecting caution about falling housing prices, a large chunk of people, or 46 per cent, said they were not interested in investing in property over the next quarter.
Just over half, or 54 per cent, said they were holding spare cash at the moment, down from 62 per cent in a previous survey in February.
House prices eased in Australia through 2004 and much of 2005. House prices have fallen the most in Sydney and the city has been hardest hit by the property slowdown, with housing affordability the lowest in the nation.
Of those with spare cash, 41 per cent of respondents said paying off their home loan was their top priority, followed by 21 per cent who said they would save the money or keep the cash handy.
Just 9 per cent said they would invest in Australian shares, down from previous surveys reflecting fear of falling stock prices given a sharp share market correction in recent weeks.
