WHILE  Reserve Bank Governor Glenn Stevens declared last week the real number of people under housing stress was exaggerated, the signs are that many home owners are fighting to keep alive their dream of home ownership.

They are cutting costs to ensure they maintain their loan payments, and the industry expects any further rate rises will unleash a tide of loan defaults and forced sales.

Housing has become a punishing investment for owner-occupiers in recent years. Not only have official interest rates gone up 12 times since 2001, commercial banks are raising their mortgage rates independently of the RBA.

The cost of living has soared - look no further than the cost of petrol, or fruit and vegetables - and new homeowners are taking on increasingly sizeable mortgages to buy in traditionally affordable areas.

Many homeowners are undoubtedly walking a financial tightrope, however their pain is not yet spilling out into the open.

People are still making loan repayments - the major banks are reporting almost record low levels of loan defaults - and real estate agents are not experiencing a discernible rise in mortgagee sales.

However, Supreme Court documents show a steady growth in the number of forced house repossessions in recent years.

In 2006 and 2007, forced possessions were at their highest number since 2000, before interest rates started their upward surge.

Turning to charity

In the past year charities like the Salvation Army and Anglicare have started to see signs of real struggle.

Jo Wickes, manager of the Magdalene Centre emergency assistance and advocacy service, said more homeowners struggling to pay their mortgage were asking for help with food and utilities and for financial advice.

Since November, the number of people seeking assistance each day had blossomed, and since January it had doubled to about 100, she said.

Salvation Army spokesman Major Brad Halse said the charity would normally deal with struggling renters, but in the past 12 months had seen an increasing number of homeowners "stretched to the limit'' seeking budgeting advice and financial assistance.

"It's quite a new indicator and we think it represents in real terms the very significant levels of mortgage stress being felt,'' Major Halse said.

Stretched to breaking point

According to the Real Estate Institute of South Australia there is little evidence at the moment of major mortgage stress in the suburbs - but this could all change within six months as people come to accept their budgets have been stretched too far.

Once that happens, more mortgagee sales will be expected. REISA president Robin Turner said homeowners would endure a lot of pain before making the tough decision to sell.

"We're not seeing any lift in that activity; people are not ringing us up saying `I need to sell my house, I can't afford to keep it' - we're not getting an abnormal amount,'' Mr Turner said. "But as the rates bite, we may see more activity in about six months I suspect.

"The full effects of the cost of living increases, the shudders in the equities markets which effects people at all levels, the interest rate rises - I think they are all gathering some momentum and it will cause more distress, but we're more likely to see it in three to six months than we are to see it now because, as I keep saying, people hang on to their houses like grim death.''

This is reflected in an online survey by mortgage brokers Loan Market and X Inc Finance, which found two-thirds of respondents would be unable to cope with another rate rise.

One-third of respondents were already at breaking point and said another rate rise would would force them to consider selling their homes. Another third said they had cut back as much as possible and their next step would be refinancing.

Predatory lenders calling in loans

David Bell, chief executive of the Australian Bankers Association, said people were meeting their repayments.

"Delinquencies are almost at close to record lows,'' he said.

He argued people who were defaulting on their loans and having their homes repossessed had overstretched by borrowing through "predatory'' non-bank lenders.

"(Interest rises) have affected some people but the real economy is doing well,'' he said. "There's always going to be a number of people who lose their homes, irrespective of who lends to them, because of things like they've lost their job, they've got health issues, they've had a relationship breakdown.

"There's a constant core of these things happening - you'll never reduce this figure to zero.''

NEWS.com.au April 12th 2008