New research reveals the top suburbs reporting mortgage stress
- More than 1.3 million Australian households are now facing mortgage stress following the RBA's February rate hike.
- Over 800,000 Australian households are likely to face further financial pressure as many shift to more expensive variable rates in 2023.
- Homeowners in wealthier suburbs are a lot more overstretched as they took out higher mortgages during the record low interest rates.
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.
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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.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
