Les Ladki thought he’d found his very own slice of paradise when he bought his house in a quiet suburb in Sydney’s north in 2001: a home among the gum trees, with views of a national park, and even an office space downstairs where he could build his software business.
He and his wife, Samar, bought the Forestville property for half a million dollars, taking out a $250,000 home loan.
“We came here, only saw half the house, and we both agreed this is perfect,” Mr Ladki told 7.30.
It was love at first sight and the couple could picture themselves growing old together in the house’s sunny rooms and leafy gardens.
But two decades later, the loan has ballooned to over $600,000 and the couple are struggling to pay it back, along with several other debts, which total more than $1 million.
The Ladkis are just one example of the growing number of Australians in mortgage arrears, falling months behind in repayments.
Some researchers believe a million Australians could be in some form of mortgage stress.
Ratings agency Moody’s says the number of borrowers at least 30 days behind in their mortgage repayments had grown over the past few years to 1.58 per cent.
“Typically you find that arrears rates rise when economic conditions weaken,” JP Morgan Chief Economist Sally Auld told 7.30.
“The fact that arrears rates are going up probably does speak to persistently low income growth.
“So, overall income growth in the economy is running at about half of long-run averages.
“And what that means is mortgage holders, in general, are using a greater portion of their income to pay back the mortgage.”
When Mr Ladki’s business ran into trouble, he slowly increased the mortgage from $250,000 to $609,000.
Then the couple were hit by several major health problems at once: Ms Ladki was diagnosed with Parkinson’s, and doctors discovered Mr Ladki had a blockage in his heart that required surgery.
“I had two lots of stents, memory loss, arthritis, and to top it all off I had the compromised nerve in my back so had to have major back surgery,” he said.
With neither able to work the debt piled up, and the couple took out a second loan with a different lender of $200,000 at an interest rate of 60 per cent.
Mr Ladki described that as “probably the biggest mistake of my life”.
With the help of friends he has since paid off that loan.
But now they have three months to sell the family home and pay off the other debts before the bank takes possession of the property.
“Never in a million years thought we’d be in this situation,” Mr Ladki said.
“If we fail to get a contract of sale within three months they’ve asked us to voluntarily hand over the house.”
He is seeking help from financial counsellors at Catholic Care.
The head of financial counselling in the diocese of Broken Bay, Nicci Rowe, said the Ladkis’ story was all too common.
“We’re seeing demand increase year on year significantly,” she told 7.30.
“There is an Australian dream for people to own their own home and often because of the cost of property, two incomes are required.”
Ms Rowe said when circumstances change — such as health problems, a marriage breakdown or a loss of income — people often find themselves unable to meet their regular mortgage payments.
Perth mother Barbara Finlay found herself in that situation, after buying a property with her husband in 2011.
The trouble started when the couple split up.
“He moved out and refused to pay anything towards it,” she said.
“I didn’t want to move out because rental prices are higher than what my mortgage was.
“I didn’t really want to upset my children, so I continued to stay on and pay all the bills on my own.”
With interest accumulating, Ms Finlay is now $2,000 behind on her mortgage repayments, owes almost $10,000 in bills and is facing the very real prospect of losing her house.
“I’ve got rates that are three, nearly four years behind,” she said.
“Water bills, everything, phone bills — they’re all out of control.”
Ms Finlay is now dipping into her superannuation to cover the debt, and living off food hampers from her local church to feed her family.
“You don’t sleep a lot,” she said.
“You are constantly worrying that you are going to be one of those families who is living in their cars.”
Sally Auld said while arrears rates were still low by international standards, current economic conditions indicated the problem was likely to grow over the coming year.
“It’s not our view that over the next six to 12 months the labour market is going to get a lot better,” she said.
“It’s not really our view that income growth is going to pick up a whole lot.
“I think what that tells you is this trend increase in arrears rates, is probably likely to continue over the next six to 12 months.”
Ms Auld said a weak housing market was only adding to the problem.
“If you are in difficulty with your mortgage, it’s very easy to exit that in a stronger housing market, because prices are going up, there is demand for property and it’s easy to sell and get rid of the debt,” she said.
“In a softer housing market that’s a lot more difficult to do, because you might have to take a hit on the price that you receive.
“So that means we’re probably in a world where mortgages stay in arrears longer than would otherwise be the case.”
Barbara Finlay is trying to make the best of her situation and hopes that, with the help of financial counsellors, she can pay back her mortgage and bills.
“I have to stay positive because if you don’t, you don’t get very far in life,” she said.
“I need to show my children that you’ve go to keep pushing. It’s the only way through.”