On Tuesday, the Reserve Bank hiked the cash rate for the ninth consecutive time, bringing it up to 3.35%.

The latest rate increase – and expectations there’s more on the horizon – has left many homeowners worried about how they’re going to meet their mortgage repayments.

Data released by financial services company Otivo revealed more than 1.3 million Australian households are now struggling.

Mortgage stress is commonly defined as when a household is spending more than 30% of their gross (pre-tax) income on their mortgage repayments.

Sydney

The report found Sydney residents living in Lakemba, Wiley Park, Fairfield, Burwood, Dulwich Hill, and Auburn are more likely to face mortgage stress after Tuesday’s rate hike.

Melbourne

In Melbourne, those living in Flemington, Kensington, Caulfield East, Malvern East, Balwyn, Deepdene, and Altona are most likely to struggle.

Brisbane

In Brisbane, the suburbs most likely to face mortgage stress are Ascot, Hamilton, New Farm, Teneriffe, Annerly, Fairfield, Ashgrove, Nundah, and Wavell Heights.


Many homeowners are also facing a looming ‘mortgage cliff' with $268 billion in fixed-rate home loans from the major banks expiring in 2023 - about 75% of the market.

Last week, the RBA forecast more than 800,000 Australian households are likely to face further financial pressure as many shift to more expensive variable rates in 2023.

Otivo Founder and CEO Paul Feeney said more homeowners are likely to fall into mortgage stress given the RBA is hinting at extra interest rate hikes in the coming months.

“The real impact will be felt when the 800,000 home loans that are currently on fixed rates move to variable this year,” Mr Feeney told Savings.com.au.

“So these home loan owners won’t feel an incremental jump, it will be one significant jump that will certainly have an impact on household expenses.”

Theo Chambers, CEO and Co-founder of Shore Financial, reiterated the significant jump seen in home loan repayments over the last 10 months.

“It’s going to be painful, surprising, and alarming for homeowners because they’ve had record low interest rates over the last few years,” Mr Chambers told the Savings Tip Jar podcast.

“A lot of those fixed rates are coming off this year to probably a variable rate of over 5% which means repayments are probably more than doubling in a 12 month period.

“There are definitely signs of stress amongst homeowners, given the RBA has started raising the cash rate more aggressively than ever.”

Homeowners in wealthy suburbs beginning to feel the pinch

More than a quarter (28%) of Aussies earning between $3,300 and $4,600 per week are now struggling with home loan repayments, based on data from the Otivo platform.

That said the 30% mortgage stress yardstick typically affects lower-income households harder as base living essentials remain fixed, affecting higher-income households less.

Mr Feeney said homeowners in wealthier suburbs are a lot more overstretched as they took out higher mortgages. 

“The average mortgage is $600,000 so taking into account the cash rate which is now 3.35%, Australian mortgage holders are having to find an additional $1,675 a month to service this,” he said.

“If you’re earning more money, you’ve likely had the capacity to borrow more so if your mortgage is $1 million, you’ll be looking at having to pay an additional $2,792 a month. 

“That’s a lot of money, and that’s when people start to get stuck.”

Blue-chip suburbs have also borne the brunt of the property market downturn.

To alleviate any financial pressures you may be under, Mr Feeney recommends:

  • Reducing your expenses by 5% and putting that into a savings account.
  • Talking to your lender to help you manage your home loan.
  • Getting personal financial advice. 

Advertisement

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.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
70%
Featured Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
$2,434
Principal & Interest
Variable
$0
$250
60%
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

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 be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. 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. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Image by Elisa Ventur via Unsplash





Ready, Set, Buy!


Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!

With bonus Q&A sheet and Crossword!

By subscribing you agree to our privacy policy