A young first-time homebuyer experiencing mortgage stress now wishes she had never bought a home or borrowed too much money.
Maddie Walton was 23 when she first bought a three-bedroom home for $690,000 on the Gold Coast in 2021, while working 70-hour weeks, also working as a medical researcher and at an Apple store.
The price was just below its upper limit of $700,000.
At the time she was earning $78,000 at her main job and another $40,000 from her part-time job, when interest rates were at a record low of 0.1 percent.
But the Reserve Bank’s 13 interest rate hikes in 2022 and 2023 saw their weekly mortgage payments almost double to $1,000. from $550 – as the RBA cash rate rose to a 12-year high of 4.35 per cent.
Ms Walton now wishes she had bought a more affordable property so she wouldn’t have to bear such a large mortgage of $621,000, including the 10 per cent deposit.
“I definitely wish I hadn’t borrowed to the limit of my absolute capacity,” he told Daily Mail Australia. “I really wish I hadn’t done that.”
‘Instead of a house, I would have perhaps bought an apartment or a townhouse.
A young first-time homebuyer suffering from mortgage stress now wishes she had never bought a house or borrowed too much money
“That would obviously have made my life a little easier.”
To cope with mortgage payments that consume 80 percent of her income, she has two roommates who help her pay the bills, sharing space with them while she works from home.
In July, Ms. Walton launched Money Lounge, a mortgage brokerage business that caters to young millennials and Gen Zers seeking home loans in the city.
“Having had my own difficult experiences with mortgage brokers in the past sparked my passion to help others who are in the same position as me and to do differently what I wish I had done to support them,” she said.
‘Some mistakes or things I wish I had known a bit more about: the grant and award schemes that were available to me, but also how to take advantage of them.’
Ms Walton now advises potential first-home buyers to ensure they buy a home that falls within the threshold for the grants, which in Queensland and New South Wales is now set at $750,000.
“I didn’t take advantage of them because I borrowed and bought up to the maximum of my capacity,” he said.
If I had another chance, I would have taken it. renamed the First Home Deposit Scheme, which in 2021 allowed first home buyers to get in with just a 5 per cent deposit, with taxpayers covering the remainder of the 20 per cent deposit.
The 2021 threshold for Queensland was $600,000 in regional centres, meaning Ms Walton did not qualify to buy a $690,000 home.
As a mortgage broker, he now reminds newcomers to the property market of the First Home Guarantee, the new name for that same scheme that also allows regional buyers to get in with a 5 per cent deposit.
The threshold in Queensland’s major cities is now $700,000, rising to $800,000 in Victoria and $900,000 in New South Wales.
Maddie Walton was 23 when she first bought a $690,000 three-bedroom home on the Gold Coast in 2021 while working 70-hour weeks as a medical researcher and at an Apple store.
“I love this plan and many of my clients use it,” she said.
“It’s a fantastic way to get to market faster.”
New South Wales offers $10,000 grants to first-time homebuyers, but Queensland is even more generous, offering $30,000 for new builds if the contract is signed before June 2025.
The purchase threshold in both states is $750,000.
But Ms Walton also warned potential borrowers not to think they will automatically get a loan because of first-home buyer grants and concessions, as lenders would still assess an applicant’s baseline spending habits.
“If you spend more than that amount on average, your expenses are higher and therefore a bank considers that your disposable income is lower,” he explained.
‘Because of this, their borrowing capacity decreases.’
Multiple streaming services beyond Netflix and many restaurant meals count against someone applying for a loan.
Ms Walton bought into August 2021 when former Reserve Bank Governor Philip Lowe said the RBA cash rate would not rise above the record low of 0.1 per cent until 2024 “at the earliest”.
“I wish I had more knowledge about interest rates.”
Variable mortgage rates have risen from two to now six, reducing what banks can lend.
During the pandemic, banks lent borrowers more than six times their pre-tax salary, and the banking regulator deemed that dangerous territory.
But the most aggressive rate hikes since the late 1980s have lowered that debt-to-income threshold to 5.2.
The 26-year-old Gold Coast-based entrepreneur said she wished mortgage brokers had told her about government repayments and the possibility of rising interest rates when she bought her first home.
“Borrowing capacity has decreased significantly as mortgage payments have increased,” Walton said.
‘Therefore, people cannot access the products they would ideally want to buy.
‘However, at the same time, current interest rates reflect typical rates in the past and are what we should expect in the future, so I think borrowing capacity has now been reduced to where it should be.’
The steepest rate increases in a generation are also driving up delinquencies, when borrowers fall 30 days or more behind on their mortgage payments.
The aggregate number of problem loans rose for the seventh consecutive quarter in June, new data from the Australian Prudential Regulation Authority showed.