RBA admits some may need to sell home, as more Aussies turn to side hustles

Like hundreds of thousands of other borrowers struggling to make ends meet, Bec Hopson has transformed her hobby into a side hustle to help pay the mortgage.

Ms Hopson is among more than two thirds of Australian home owners who have started or are considering a side hustle, hobby business or a second job to help with their home loan repayments.

None of them would be any less likely to do so in the wake of Thursday’s speech by Michele Bullock, Governor, Reserve Bank of Australia, who used an annual address to ram home the point that inflation would not allow for an interest rate cut any time soon, while acknowledging it meant “some may ultimately make the difficult decision to sell their homes.”

“For owner-occupiers with variable-rate loans, we estimate that around 5 per cent are in a particularly challenging situation, where the combined total of their essential spending and scheduled mortgage repayments is more than their income – that is, they have a cash flow shortfall,” she said during her keynote address to the Anika Foundation Fundraising Lunch in Sydney.

“Although this group is fairly small overall, those in it have had to make quite painful adjustments to avoid falling behind on their mortgage repayments.

“This includes things like cutting back on their spending to the more essential items, trading down to lower quality goods and services, dipping into their savings or working extra hours.”

The extra hours are all too familiar to Ms Hopson.

While her side gig is also labour of love, she only decided to monetise it to meet cost of living and debt obligations.

A Tasmanian-based mother working in the legal industry, during her pregnancy she took up the hobby of drawing and painting people’s ‘happy places’; like their home or a place they have visited.

In 2023, Ms Hopson moved into a new home with her husband and her child. The additional income from her new side hustle has been supporting the cost of daily life, day care, bills and her mortgage – which has become more poignant with rising interest rates.

“With the cost-of-living crisis, I decided to turn my hobby into a hustle so I could earn money to help pay the cost of everyday expenses and my mortgage.

“A lot of people are cutting things out at the moment when they can’t afford them.

“Turning my hobby into income was a way of helping me keep my work-life balance and bringing in some extra household income to pay the bills without giving up something really important to me.”

According to new research by Great Southern Bank, two in three (64 per cent) Australians say their financial plans have been set back by at least 12 months due to the economic climate.

As a result, 67 per cent are looking for extra income revenue streams, whether through extra employment or side gigs.

Megan Keleher, Chief Customer Officer at Great Southern Bank, said their No Place Like Home report found people were using their entrepreneurial spirit to think about ways to boost their incomes and stay focused on paying off their home, as well as younger people living with parents for longer.

“More than before, we’re seeing would-be homeowners looking for ways to save money and achieve their financial goals, even if it means taking a longer-term view.”

The report found 39 per cent of Baby Boomers who still have adult children at home are happy for them to stay forever.

Most parents with children at home (58 per cent) believe their children will be able to buy a home between ages 26 and 35. One in 10 homeowners say they will consider downsizing in the future to contribute to a deposit for their kids and help them achieve home ownership.

In the past two years, 7 per cent of Australians have either moved back in with family, or have had adult children move back home, underscoring a concerted effort to save on housing expenses.

Stark RBA warning

Ms Bullock said lower income borrowers are over-represented in the group of people who are really struggling.

“Despite the pressure on household budgets, only a small share of borrowers is currently at risk of falling behind on their mortgage repayments.

“Key reasons for this are that the labour market has been strong, people have been able to find and stay in work and many have been making adjustments to their spending, particularly on discretionary items.”

Ms Bullock said this group is having to make painful adjustments to avoid falling behind on their mortgage repayments.

“This includes things like cutting back on their spending to the more essential items, trading down to lower quality goods and services, dipping into their savings or working extra hours,” Ms Bullock said, before admitting some may need to sell their home.

Highlighting that interest rates were a blunt instrument being used to tackle a highly nuanced economic challenge, the RBA boss said interest rates might need to rise in order to fight inflation.

“Just as inflation is felt differently by various groups in the community, so too are interest rate moves and we therefore need to pay close attention to conditions facing different parts of the community, including the most vulnerable.

“The first thing to say is that I understand that the Board’s message on interest rates is not what many borrowers want to hear.

“Those with mortgages are feeling the squeeze on their cash flows not just from high inflation, but also from the increase in interest rates that has occurred in response to it, and as labour market conditions ease, more households will experience a strain on their finances from unemployment or reduced working hours.

“Information received through the RBA’s liaison program indicates that more people than usual are seeking support from community organisations, and often for the first time.”

For those at the brink, a side hustle or second job may not be enough to avoid a worst case scenario.

The RBA is due to meet again on 24 September after keeping rates at 4.35 per cent last month.