MORTGAGE HOLDERS DEFYING PREDICTIONS AND MANAGING DEBT

The number of home loans in arrears are less than one percent of all borrowers, defying predictions of dire outcomes from a ‘mortgage cliff’ and the impact of high interest rates and cost of living pressures.

Most borrowers are making their home loan repayments on time, and although the number of loans in arrears has increased since late 2022, they represent only a tiny portion of the market, according to the Reserve Bank (RBA). Less than 1 percent of all housing loans are 90 or more days in arrears, which is lower than the pre-pandemic peak.

In its latest Financial Stability Review released this month, the RBA said households remain under pressure from high inflation and interest rates, with consumer sentiment very weak. More Australians than usual are seeking support from community organisations, and lenders have a small but rising number of borrowers on temporary hardship arrangements.

“Based on their latest assessment of the economic outlook, banks expect arrears rates to increase a bit further from here but remain low relative to history,” the RBA said.

The RBA notes that since the start of 2022, real disposable income has fallen by about 7 percent to be near its pre-pandemic level in per capita terms. Most mortgagors have seen 30-60 percent increases in their minimum home loan repayments since rates began rising in May 2022. However, only about 5 percent of variable-rate owner-occupier borrowers today have expenses exceeding incomes, giving them a cash flow shortfall.

Households are coping well due to a strong labour market, which is allowing them to increase their hours or get a second job if necessary. They are also drawing on large savings buffers, partly created by pandemic stimulus and lower spending during lockdowns, and have reduced their discretionary spending as necessary.

The loan arrears rate is highest among highly leveraged borrowers, however it is still very small at less than 2 percent. The share of mortgagors estimated to have a cash flow shortfall combined with low savings has risen over the past two years but still represents less than 2 percent of variable-rate owner-occupier borrowers. Unusually, the arrears rate among recent first home buyers is lower than average, possibly reflecting the Bank of Mum and Dad enabling young buyers to purchase properties with less debt.

The arrears rate among borrowers who rolled over from low fixed rates to variable rates in one hit – an event labelled ‘the mortgage cliff’ which was expected to hit hardest late last year – are managing their repayments just as well as other borrowers. “This resilience partly reflects that these borrowers were able to build up savings buffers over a longer period of unusually low interest rates,” the RBA said.

High income earners are depleting their pandemic savings at the fastest rate because they tend to be servicing greater debt. But they still have the highest savings and are likely using some of it to support continued discretionary spending. Conversely, the lowest-income mortgaged households grew their savings in 2023.

The RBA says nearly all borrowers should be able to service their loans even if inflation is more persistent than expected and interest rates remain higher for longer. While the RBA expects a rise in unemployment, it noted that historically mortgagors are less likely to lose their jobs. Many mortgagor households also have multiple incomes, and about half of all borrowers have enough savings to service their debts and essential expenses for at least six months. Lenders can also offer temporary support to borrowers who lose their jobs.

The RBA said most borrowers also have strong equity positions, which protects them from default and limits risk for lenders. Rising property prices last year gave homeowners more equity and banks have been issuing fewer high loan-to-value (LVR) loans since 2021. These types of loans are now at near-historical low levels.

“The share of loans (by number or balances) estimated to be in negative equity at current housing prices remains very low,” the RBA said. “While usually a last resort and very disruptive for owner-occupier borrowers, this would allow almost all borrowers to sell their properties and repay their loans in full before defaulting.”

Hypothetically, in a severe economic downturn during which housing values fell 30 percent, the RBA estimates that the share of loans falling into negative equity would increase to about 11 percent. The RBA said significant losses for lenders would only materialise if more borrowers became unable to service their loans.

Article originally published on Kanebridge News Australia

Greenwich, Connecticut, is in New England (just barely), but that doesn’t mean it’s a quaint, sleepy small town with covered bridges and white churches on the green.

It’s leafy, certainly, but it’s also a luxury-minded power centre close to New York City, with many celebrity residents (director Ron Howard, singer Diana Ross, actor Meryl Streep and, at one time, Australia’s own Mel Gibson).

The main shopping street, Greenwich Avenue, is home to brand stores such as Hermès, Kate Spade, Saks Fifth Avenue, and Tiffany & Co.

And Greenwich, particularly in the “back country” north of the Merritt Parkway, is host to some of the most exclusive real estate in the world.

The average price for a single-family home in the second quarter of 2025 was USD $3.25 million (AUD $4.9 million). But that’s merely an entry point, buying a smaller home in one of the town’s less desirable neighbourhoods.

What does USD $43 million (AUD $66 million) buy in Greenwich?

Last autumn’s most expensive listing offered a 1,068-square-metre waterfront home with eight bedrooms and 11 bathrooms, plus “Gatsby-like lawns”, a gym, games room, party room, wine cellar, fruit orchard, pool and spa. The front and side porches have heated floors.

Prefer something more traditional and secluded? For USD $33 million (AUD $50 million), buyers could close on an 11,760-square-metre Georgian manor on 3.2 hectares, featuring eight fireplaces, an elevator, and a dumbwaiter.

The first floor features a three-storey cascading chandelier. For bibliophiles, there’s a two-storey mahogany library. If bocce is more your pace, a similar USD $25 million compound on 7.5 hectares, built for a liquor magnate in 2009, may appeal. Fourteen bathrooms should suffice.

The Greenwich market is strong, but not without challenges.

“The big problem is that there’s no inventory,” said Evangela Brock, an agent with Douglas Elliman. “It’s extremely low at all price points.”

In November, just 15 properties under USD $1 million (AUD $1.52 million) were listed without contracts, compared with 23 above USD $10 million (AUD $15.2 million). Of those, six had contracts pending. Greenwich has more than 17,000 single-family homes.

Kanebridge Quarterly toured two mid-priced houses in Greenwich. “You don’t lose money in Greenwich real estate,” said Beth MacGillivray, a realtor with the Higgins Group. “This is the hot spot.”

MacGillivray opened the door to a 733.9-square-metre Georgian colonial in the Sherwood Farms Association development her family built in 2005. The house was expected to sell for about USD $5 million (AUD $7,743,535).

The six-bedroom, four-level house is move-in ready, with staged furniture showing its potential and many of the amenities that buyers in this range expect.

Visitors enter through a two-storey foyer with a marble floor. A circular staircase leads to an airy living room with double-height ceilings.

There’s a main bedroom with his-and-hers bathrooms, a cherry-panelled library with cigar-smoke venting, five fireplaces, and a state-of-the-art kitchen with a breakfast nook by Greenwich-based designer Christopher Peacock.

Most rooms have huge walk-in wardrobes. Even the laundry room has granite countertops. Custom millwork, cabinetry and fixtures are evident throughout.

The drawbacks? A smaller yard and no pool. Still, refugees from the city would marvel at the abundant interior space.

Not far away, an entirely different house was on the market for USD $2.66 million.

The imposing 696.7-square-metre, nine-bedroom, seven-bath Georgian/Federal home on Shady Lane in the Glenville neighbourhood was built in 1900. Its good bones and inherent grandeur were apparent, as was a clear need for updating.

“It’s a good project for someone,” said realtor Kaori Higgins. “It needs the right buyer, someone who is looking to return it to its stately original condition.”

Given the hot market, some buyers may be tempted to tear it down and build anew.

But the house is filled with charming period details, including hand-built stone fireplaces, reading nooks, pocket doors, leaded windows and beautiful original millwork.

The second floor offers a vast veranda with views of Long Island Sound and a built-in swimming pool.

The drawbacks? Bathrooms that were awkwardly redesigned in the 1970s, unsightly flooring on the upper levels, and crumbling exterior elements.

Higgins noted that a nearby sister property, fully renovated, sold for USD $11 million (AUD $17 million). Any buyer of Shady Lane’s faded elegance would need both imagination and deep pockets.

For contrast, Kanebridge Quarterly left Greenwich for nearby Fairfield’s upscale Greenfield Hill neighbourhood to visit Lion’s Gate, a 595 square metre Tudor Revival home built as a modest dwelling in the 1920s but extensively expanded and remodelled in 2000.

With three acres of land, a guest cottage, an artist’s studio and a pool house, the asking price is USD $3.3 million (AUD $5 million). Like the Sherwood home, Lion’s Gate is flawlessly move-in ready, with designer touches throughout.

The entire second floor was added during the renovation and features parquet flooring, a massive main suite, arched doorways and 2.74-metre ceilings.

Many rooms include walk-in wardrobes, extensive carved millwork and built-ins. The wood-panelled library (on the site of the former stable) is warm and inviting.

The expansive kitchen includes a window seat with a hand-painted ceiling, a wine cooler and a butler’s pantry.

Realtor Lorelei Atwood said Fairfield faces the same inventory shortage as Greenwich.

“Demand is growing as more New York-based executives are being told they have to report to the office,” she said. “Fairfield has always been a commuter town.”

Why is this home USD $3.3 million (AUD $5 million), and the Sherwood property around USD $5 million (AUD $7,743,535)?

Location. Greenfield Hill is lovely, but Greenwich real estate occupies a rarefied class of its own.

Note: Thanks to realtor Sherri Steeneck for chaperoning.

This story appeared in the Autumn issue of Kanebridge Quarterly, which you can buy here.

MORTGAGE HOLDERS DEFYING PREDICTIONS AND MANAGING DEBT

However, there is one group spending their savings at a faster rate than the rest

A haven for hedge-fund titans and Hollywood grandees, Greenwich is one of the world’s most expensive residential enclaves, where eye-watering prices meet unapologetic grandeur.