Western Sydney, Western Melbourne the top suburbs for mortgage stress

author-avatar By on May 24, 2021
Western Sydney, Western Melbourne the top suburbs for mortgage stress

Suburbs in Melbourne and Sydney's west are seeing the highest rates of mortgage stress in the country.

Postcode data analysed by Digital Finance Analytics (DFA) and commissioned by consumer group CHOICE shows there are more than 130,000 stressed households in the top 10 NSW and Victorian suburbs. 

Mortgage stress can be loosely defined: while some benchmark it at 30% of pre-tax income being spent on housing, DFA defines it as "when household cash flows are negative and money coming in isn’t enough to cover the cost of mortgage repayments and other outgoing expenses." 

Based on that definition, the number of households in New South Wales' most stressed suburbs reached 63,502 in April, while Victoria hit more than 70,000. 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you.

Where are Australia's mortgage stress hotspots? 

The top 10 suburbs nationally for mortgage stress includes suburbs in New South Wales, Victoria, Queensland, and Western Australia, but it's the first two that dominate the list. 

The postcode with the most households in stress is 2560 with 10,578, encompassing suburbs in Sydney's West like Campbelltown. 

New South Wales' 2170 postcode in the Liverpool area also took out second place with almost exactly 10,000 households in stress. 

WA's 6065 postcode came in third with 9,889 stressed households, and Queensland's 4350 in Toowoomba placed third (9,693). 

Despite not placing in the top four, Victorian suburbs accounted for places five through to nine:

  • 3805
  • 3806
  • 3029
  • 3350
  • 3037 

See also: Half of low-income renters now in rental stress

Not the time to relax responsible lending, CHOICE says 

DFA reported that mortgage stress actually fell in 2020, due to COVID-19 mortgage deferrals which eased the pressure on household budgets, before increasing again at the beginning of May 2021.  

Now those repayment deferrals have ended, as well as the Federal Government's plan to scrap various responsible lending laws, CHOICE CEO Alan Kirkland said it's time for the government to scrap that plan. 

"These are households where from fortnight to fortnight, people are spending more than they are earning," Mr Kirkland said. 

"That means that they have to make difficult choices, like whether to put food on the table or keep up with repayments. If they can't maintain the juggling act, they risk losing their homes. 

"Safe lending laws were put in place to avoid the huge damage to families and communities caused by mortgage stress - by making banks take care to avoid giving people loans they won't be able to afford to repay.

"If the Government gets away with its plan to axe safe lending laws, people who are desperate to get into a rising housing market will be at risk of overexposure and people who need to refinance won't be adequately protected."

Related: 125 organisations pen letter opposing plan to axe responsible lending laws

The plan to overturn some of these responsible lending laws has met a roadblock recently in the form of One Nation, with leader Pauline Hanson saying she would not support the repeal as it would be "against the best interests of millions of Australians".

“The government is giving the big banks almost carte blanche and is allowing them to self-regulate using the banks’ own weak, self-serving code of conduct that doesn’t provide strong consumer protection or responsible lending provisions,” Senator Hanson told The Australian Financial Review last week. 

Centre Alliance may also vote against the responsible lending repeal. 

"We're glad to see more and more Senators - most recently Senator Hanson - stand up to the banks and the Government," Mr Kirkland said. 

"Many people are still doing it tough, and need laws that protect them from the bad bank behaviour that led to the banking royal commission."

Treasurer Josh Frydenberg initially said the relaxed credit laws would help Australia's COVID-19 recovery. 

"As Australia continues to recover from the COVID-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses," Frydenberg said.

"Maintaining the free flow of credit through the economy is critical to Australia's economic recovery plan."

60% of parents open to helping their children buy 

With mortgage stress linked to an inability to meet mortgage repayments, due to either high interest rates, an unaffordable property, or the borrower's income, there could be cause for concern around the number of first home buyers borrowing with help from their parents. 

The Bank of Mum and Dad recently became the 9th largest lender in Australia, and research from Mortgage Choice last week found 60% of parents would be willing to gift or lend their kids money to help them buy a property. 

More than half (53%) meanwhile said they would act as a guarantor, and 45% would consider using the equity in their home to fund a child's home purchase. 

While acting as a guarantor can present risks as the guarantor becomes responsible for the repayments in the event of a default, Mortgage Choice CEO Susan Mitchell said these figures are welcome news for young property buyers. 

“As parents, we’re used to doing what we can to help our children achieve their goals," Ms Mitchell said. 

"In a housing market recording such phenomenal growth, it’s perfectly understandable that parents look for ways to help their kids buy a home, whether that be as a guarantor or providing them with a gift for their home loan deposits.

"Getting into the market with a guarantor loan means that parents won’t have to give their kids money. Instead, they can use the equity built up in their home."


Photo by Elton Sa on Unsplash   

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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