Half his income goes to two mortgages and investors are leaving. Should he follow them?

He is 41 and lives in Adelaide with his partner and two kids in primary school. They bought their home in 2019. In 2023 they used the equity to buy an investment house in regional Queensland.

Then came four rate rises this year.

Between the home loan and the investment loan, repayments now take about $9,800 a month. His partner did the sums on a Sunday night: close to half of what the household brings home. The rent covers part of it. The rest comes out of the same account that pays for school fees and groceries.

Last week his broker sent him a link. The headline said investors are fleeing. The advice that came with it was simple. Sell the investment, refinance the home onto a lower rate, and breathe.

He is a composite illustration, not a real person. The numbers behind his situation are real.

The question

"We are putting half our income into two mortgages. Everyone I read about is selling or refinancing. If the smart money is getting out, why am I still holding on?"

The answer: the smart money is staying put

Start with the headline figure, because it is doing a lot of work.

PRD Real Estate's latest Australian Economic and Property Report, as reported by realestate.com.au on 21 October, found mortgage repayments now take a record 50.9 per cent of family income. Affordability has gone backwards by 3.3 percentage points over the year, which wipes out what last year's rate cuts gave back.

That is a real squeeze and it is pointless to pretend otherwise.

Now hold the other numbers from the same report next to it.

Fewer than 1.5 per cent of housing loans are in arrears. Less than 0.5 per cent of outstanding mortgage balances are in negative equity. Average prices have fallen 1.6 per cent from their March peak.

Read those three again. Half of income going to repayments, and almost nobody is missing a payment. Almost nobody owes more than their home is worth. Prices have slipped by about the cost of a kitchen renovation on a median house.

So who is leaving?

Loan Market's lodgement data says investor loan applications have fallen 44 per cent nationally since January, and 56 per cent in Queensland. For existing properties the national fall is 56 per cent, against 10 per cent for new builds, with proposed changes to negative gearing and capital gains tax adding to the uncertainty.

Those are applications to buy. They count people who decided not to start. Nobody in that figure was forced out of anything.

Loan Market credit expert Shay Waraker said in the article that buyers "may be waiting to see if prices fall further before jumping into the market." That is a timing call. People on the sideline are staying on the sideline.

The other record in the story is refinancing: 57 per cent of all Loan Market Group lodgements in September. Those are owners who are staying put and making the loan cheaper. More than half of everyone who walked into a broker that month was doing exactly that.

The expensive mistake

Our Adelaide composite is being asked to do two things at once. One of them is sensible. The other could cost him years.

Refinancing the home loan onto a better rate is housekeeping. Most of the market is doing it, and if his lender has not reviewed his rate since the hikes, it should.

Selling the investment because a headline says investors are leaving is different. He would turn a 1.6 per cent paper dip into agent fees, marketing, a capital gains event and the loss of the rent that currently covers part of his repayments. He would also be selling into a market where buyer applications have fallen 24 per cent since January, which means fewer bidders for his house at the exact moment he needs them.

And he would be doing it to fix a cash flow problem that a rate review might already solve.

That is the pattern we see. The household under pressure sells the asset that is holding its value and keeps the loan structure that caused the pressure.

What it means for you

If you own your home with equity and are watching this from the sideline, there are two separate questions inside that headline and they get mashed together.

The first is "can my household carry these repayments?" That is a structure question. It comes down to the rate you are on, the loan term, whether your offset is doing anything, and whether the rent on any investment is covering what it should.

The second is "is the market about to get worse?" That is a timing question, and the PRD report's own chief economist, Dr Diaswati Mardiasmo, urged buyers to focus on local market conditions and their own finances rather than national headlines. Rates are expected to stay elevated until at least 2027. Waiting for them to fall is a hope, with a mortgage attached.

A national average of 50.9 per cent tells you nothing about your street. Two streets in the same suburb can be having completely different outcomes right now, one holding its value and renting in a week, the other sitting on market for months. The investors who are hurting are the ones who bought the suburb's name instead of the street's data.

The Ripehouse reframe

Being behind on cash flow in a year like this is a structure problem, not a discipline problem, and it is fixable. The right asset on the right street, with a loan built to be held through four rate rises, does not need the headline to go away.

Across 997 client portfolios since 2021 we have published the full spread of results, including the portfolios that underperformed. The median portfolio has grown 19.0 per cent a year on a 5-year rolling basis, against roughly 6.3 per cent for the combined capitals (CoreLogic/Cotality benchmark). Past performance is not a guarantee of future results. We publish it so you can see the whole distribution, including the years when the headlines looked exactly like this one.

Headlines measure the nervous. Structure measures what you can hold.

Want to see how we test whether a household can carry an asset through a year like this, street by street? Join Jacob's free live webinar.