With more than 800,000 low fixed-rate home loans set to expire this year, many homeowners are at greater risk of financial strain, particularly those who hadn’t built up a savings buffer.

PEXA’s Emerging Mortgage Risk Report identified 181 postcodes in New South Wales where homeowners are likely to be at high risk of missing a mortgage repayment by May.

This was a sharp increase compared to the three months ended December 2022, where only 119 postcodes were deemed at high mortgage risk, an increase of 52.1%.

In Victoria, 22.3% of all postcodes in the state (more than one-in-five suburbs) were at high risk of default, up from just two suburbs in December 2020.

Queensland exhibited a lower risk profile than other eastern states, with 19 postcodes expected to move into high mortgage risk by May this year. 

The higher risk in NSW and lower risk in Queensland was driven largely by property prices in the respective states which subsequently influenced overall loan amounts.

PEXA’s Head of Research Mike Gill said the report highlights how recent economic challenges are affecting borrowers across the country.

“With interest rates continuing to rise and the cost of living also squeezing the budgets of households, there has been a pronounced spike in the number of families facing more immediate mortgage risk,” Mr Gill said.

“In addition to these factors, with an estimated 800,000 fixed rate loans due to expire during 2023 and reset at a significantly higher cost, it’s easy to see why refinance volumes are at a record high as mortgagees seek to strike a better deal.

“It’s clear that lending pressure is set to stay in the months ahead.”

Which postcodes are expected to face the highest risk? 

PEXA categorised mortgage risk into low, moderate, high risk, and very high risk based on the proportion of family income needed to repay the mortgage.

Families in high risk postcodes are allocating between 40-60% of their income to meet their home loan repayments while those in very high risk postcodes are allocating more than 60% to cover their repayments.

Affluent metropolitan areas topped the most risky postcodes in NSW and VIC, whereas QLD regional postcodes were most likely to fall in the high risk band. 

The income distributions of high-risk postcodes in NSW and VIC were similar and encompassed both high and low income areas. Almost 40% were from the very high income postcodes, with around a quarter from the low income group.

In contrast, Queensland’s higher risk postcodes skewed towards lower income areas, where 37% were low income postcodes and only 11% were very high income postcodes.

New South Wales postcodes with highest mortgage risk

Postcode Mortgage risk band
Northbridge (2063) 71.8%
Dural (2158) 71.4%
Avalon Beach (2107) 69.4%
Kingsgrove (2208) 68.2%
Glenhaven (2156) 66.4%

Victoria postcodes with highest mortgage risk

Postcode Mortgage risk band
Balwyn (3103) 74.2%
Balwyn North (3104) 71.4%
Canterbury (3126) 70.2%
Balnarring (3926) 64.6%
Glen Waverley (3150) 62.5%

Queensland postcodes with highest mortgage risk

Postcode Mortgage risk band
Noosaville (4566) 58.3%
Maleny (4552) 57.1%
Tallegudgera (4228) 56.9%
Tewantin (4565) 53.8%
Doonan (4562) 48.5%

Australians forced to dig deeper into their pockets

Further illustrating the lending pain being experienced, NSW borrowers will require an extra $15,985 per year on average to meet their loan repayments, an increase of 62.3% from December 2020.

Victorian and Queensland homeowners will have to cough up an additional $13,327 (+67.3%) and $11,567 (+67.0%) respectively.

While it’s typically expected those in higher income postcodes will be able to weather rising mortgage repayments, they tend to be a lot more overstretched as they took out higher mortgages before the consecutive rate rises.

Repayments for those in Northbridge (2063) and Canterbury (3126) are projected to rise by more than $60,000 annually.

The suburbs where homeowners have seen prices grow upward of 300%

On the flipside, over the past decade, a handful of regions have seen multi-million dollar profits according to recent PropTrack data. 

Lifestyle areas saw the biggest growth in house prices, as property seekers sought out coastal and park-side living.

The top 4 suburbs that saw the largest house price increase nationally include:

  1. Byron Bay (NSW) - experienced 361.5% growth in ten years
  2. Bright (VIC) - experienced 256.6% growth in ten years
  3. Suffolk Park (NSW) - experienced 256.1% growth in ten years
  4. Berry (NSW) - experienced 255.9% growth in ten years

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