Thousands of Victorians (Australia) risk losing their homes for falling behind in their loan repayments. Around 3700 home owners have been issued with property repossession warnings in the courts already this year. This wil be triple last years total.
Causes for this are being blamed on easy credit, soaring petrol prices, tighter household budgets and new home owners not allowing for rates, property maintaince and insurances when purchasing their first home. When they were renting they didn't have to pay these outgoings. Many home owners are living on the edge and more pain is on the way with a likely rate increase.
Australians owe $753 billion on home loans. A .25 % rate rise would add an extra $14 a fortnight to an average $225,000 loan. People are loading up their credit on up to ten credit cards and they are not allowing for any hiccups that can occur. An illness or rate increase can cause every thing to go pear shaped. Then they risk losing everything. Some home owners are desperate and are taking on no deposit loans from last resort lenders preying on them.
There were nearly 3700 court writs against loan repayers this year compared with 2581 last year.Some people end up paying the debts or refinancing to another institution. But the rest are opting out of their mortgage and going back to renting. People are being taken to court for being behind in only two payments on their home loan.What some finance brokers are doing is reaping in commissons by signing up people to loans that they cannot afford. There needs to be tougher laws to crack down on these irresponsible lenders. Non bank lenders had 4.5% of home owners behind in their payments by up to 90 days, compared to bank loans of .3%
As the economy tightens there will be increasing opportunities for investors to pick up deals as unsurspecting home owners get trapped into home loans that they can no longer afford. This will also push up rental prices because the people that default on their loans will be paying big weekly repayments already. And going back to renting will seem like a breeze after struggling through high mortgage repayments as well as all the outgoings associated with owning a property.
It is forcast that the percentage of people renting will increase upto 36% of the population by 2015 compared to 26% now. A lot of people are more than happy to just pay their rents and not be bothered with the hassles of owning their own home. Generally these people are very good tenants, they look after the property and always pay their rents on time.
These are the type I ensure my property managers put in my investment properties.They give me less problems and I am able to increase the rents in line with the CPI increases. There will be some great opportunities for smart investors in our present economy. What I intend to do is off load any under preforming properties and replace them with some of the gems that will be coming up in the near future. There will be some great deals available to savvy investors who are able to strike as they come up. It will be a good time to reshape your portfolio to ensure you have blue chip properties in it. The real kicker is it will not cost you any more to replace any of your underperforming properties as you will be buying in these new ones at heavily discounted prices.
As these lean times move in I intend to keep an eye on my own gearing. The last thing you want is to end up on the scrap heap as well.
To your investing success.
Leo Love
PS If any of your family or friends are interested please pass this on to them.
http://www.therealestateinvester.com
I am an experienced and passionate investor. I buy typical mum and dad type houses that give me cash flow and capital growth. My website offers helpful tips and ideas for any type of investor to help you with your wealth creation. Using my site will help to prevent you falling into the traps the inexperienced investors do.
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