Desperate to escape financial turmoil in the wake of the pandemic and rising interest rates, Gilbert Grace and Michelle Millard knew they had to make a seismic shift in their lives.
So the couple – who were struggling to pay the mortgage on their home in Baxter, 60 kilometers south-east of Melbourne – began looking for a cheaper housing option that would take the financial burden off their shoulders.
In their search for a debt-free life, the couple stumbled upon Ouyen, a small town in the Mallee farming region about five hours north-west of Melbourne – where more than half of the 1,100 residents own their homes outright.
It was the shelter they had been looking for.
Before the COVID-19 pandemic, Ms Millard, 58, ran a thriving driver training business on the Mornington Peninsula and Mr Grace, 73, was a landscaper working in schools.
But both businesses collapsed during Victoria’s long lockdowns, leaving them with no income.
As they struggled to save up and pay living expenses, they relied on credit cards and racked up $80,000 in debt.
But after selling their previous home for $600,000, Mr Grace and Ms Millard were able to buy a three-bedroom house in Ouyen for $250,000 in August 2022 and clear their credit card debt.
“It’s like a weight off your shoulders … we don’t have that mortgage we need to catch up on,” Ms Millard said.
“You know, paying the mortgage with the fear of God that if it’s not paid, they’re going to come and take everything you’ve got.”
The concern of the mortgage belt
Compared to state and national averages, Ouyen residents experience significantly less mortgage stress.
In Ouyen, 51 per cent of residents own their homes outright, compared to 32.2 per cent of Victorians and 31 per cent of Australians, according to Census 2021 data.
Market research company Roy Morgan found that 1,560,000 Australians – 30.8 per cent of mortgage holders – were “at risk” of mortgage stress in the three months leading up to April 2024.
The situation is even more severe in areas with urban growth, where more than 60 percent of households are under mortgage stress.
According to Mortgage Stress Victoria, which supports people struggling to pay their home loans, areas such as Bendigo, Geelong and Ballarat on Melbourne’s peri-urban fringe have seen an increase in property listings and a fall in property prices. , indicating potential financial distress among homeowners.
Financial freedom feels ‘luxurious’
S&P Global Ratings analyst Erin Kitson said the number of loans more than 30 days past due had risen steadily as interest rates rose.
According to the agency, arrears in Victoria are the third highest in the country, reaching 1.08 per cent in May, behind New South Wales (1.10 per cent) and Western Australia (1.29 per cent).
“Many parts of regional Australia have demonstrated a reasonable level of resilience to rising interest rates compared to larger capital cities, where higher property prices relative to incomes have increased mortgage stress,” Ms Kitson said.
Now mortgage-free, Ms. Millard and Mr. Grace revel in their newfound financial freedom.
The Baxter-to-Ouyen move not only freed them from mortgage stress, but also enabled them to enjoy a lifestyle that included more community involvement and personal fulfillment.
Mr. Grace now works just 10 hours a week at the local real estate agency. He uses his free time to volunteer at the Ouyen Tennis Court, the community golf club and hosting gardening workshops at his home.
Ms. Millard is in the process of finding a volunteer administrator position.
“We wake up every morning to the sound of birds. I like to meditate,” Mr Grace said.
“I get up at four o’clock every morning and look at the stars in the sky, many of which we couldn’t see when we lived in Melbourne. It feels luxurious.”
The decline of home ownership
Mortgage Stress Victoria chief executive Nadia Harrison said Australians were “really divided” on the status of housing.
“We’ve roughly split the population into thirds – with a third owning a home outright, a third owning a mortgaged property and a third are renters,” Ms Harrison said.
She said there was an “unprecedented” financial strain on mortgage holders and the financial pressure was compounded by rising living costs across sectors, from health and education to energy and food.
“Average mortgage payments relative to median income are at an all-time high,” she said.
“People who have a house with debt on it are really making it very difficult.
“The percentage of the population that owns a home is actually declining, historically. Over the last 30-40 years, it’s been gradually decreasing.”
Ms Harrison said Australia would never reach a point where 51 per cent of people owned their homes outright, as they do in Ouyen.
“Our trajectory is that there will be more renters than homeowners relatively over time, unless there are dramatic changes in policy settings.”
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