Australias mortgage wastelands: Doomed postcodes where borrowers are struggling the most... but they could be an opportunity for buyers
Australian borrowers have been hit with the most punishing interest rate rises in a generation - and it has devastated mortgage holders in some postcodes.
Australian borrowers have been hit with the most punishing interest rate rises in a generation - and it has devastated mortgage holders in some postcodes.
The Reserve Banks 13 increases in 2022 and 2023 were the most dramatic since the late 1980s to combat a post-Covid inflation surge. Borrowers are now paying 64 per cent more on their monthly repayments than they were two-and-a-half years ago.
Thats almost $19,000 a year extra on an average, $600,000 home loan. But in some outer suburban areas of Sydney, mortgage holders would conservatively be paying $23,000 more.
Parts of Melbourne are in particular trouble, too, despite having more affordable housing than Sydney, Brisbane or Canberra.
Perth is another mortgage hell hotspot. Some of its suburbs are in peril after house prices soared by more than a fifth during the past year.
And regional areas of Australia, despite being cheaper overall compared to cities, arent immune from mortgage stress.
Some borrowers are coping with higher mortgage costs by no longer going out to restaurants or cancelling subscription services like Netflix.
Others have delayed getting a new car or put off going on an overseas holiday.
Australian borrowers have been hit with the most punishing interest rate rises in a generation
The cost-of-living crisis has also seen borrowers take on extra work just to keep up with the mortgage repayments.
But hard work or extra scrimping and saving doesnt necessarily guarantee someone wont be in mortgage stress - a situation where they cant pay their bills.
This is especially the case in the outer suburbs of Australias big cities where two incomes are needed to pay off a typical house.
Credit ratings agency Moodys has revealed the postcodes where more borrowers are in arrears, or 30 days or more behind on their repayments.
This is occurring as the Big Four major banks - Commonwealth, Westpac, NAB and ANZ - rule out any relief in 2024 from the Reserve Bank of Australia.
That means the RBA cash rate is tipped to stay on hold, at a 12-year high of 4.35 per cent, until at least February.
Moodys Ratings analyst Letitia Wong warns mortgage arrears are set to get worse.
Mortgage delinquency rates, which have increased in most areas around Australia, are set to continue to rise moderately over the next year as households take time to recover from the burden of high interest rates and cost-of-living pressures, she says.
Sydney
Casula, in south-west Sydney, is in particular trouble with 4.08 per cent of borrowers in arrears in May 2024 - or more than double the national average of 1.99 per cent.
Thats also big increase from the 2.92 per cent level of 2023 in the 2170 postcode.
Casula in south-west Sydney is in particular trouble with 4.08 per cent of borrowers in arrears in May 2024 - or more than double the national average of 1.99 per cent
Houses are particularly expensive in New South Wales as a result of Sydney being Australias most unaffordable capital-city market.
The states average new loan in August was $771,422, which would buy a $964,277 house with a 20 per cent mortgage deposit, Australian Bureau of Statistics lending finance data showed.
Casulas median house price of $1.184million means new borrowers with a 20 per cent deposit would typically be paying off a $947,110 mortgage.
A couple would need to earn $182,137 between them to even qualify for a loan.
Both would have to be working full-time unless the main breadwinner was a particularly high-income earner.
When it came to mortgage arrears, Melbourne was the worst-affected city, taking up 14 spots on the top 20 list
Melbourne
When it comes to mortgage arrears, Melbourne is the worst-affected city, taking up 14 spots on Moodys top 20 list.
Victorias unemployment rate of 4.4 per cent is above the national average of 4.1 per cent, which means borrowers are more likely to fall behind with loan repayments if they lose their job.
Melbourne is emerging as a mortgage delinquency hot spot, Ms Wong says.
Moodys Ratings analyst Letitia Wong said mortgage arrears were set to get worse
Many of the suburbs with the highest mortgage delinquency rates in Australia are in Melbourne.
The unemployment rate in Melbourne is above the national average, while income growth is below the national average and the housing market is softer than other major cities.
Melbourne house prices fell by 1.8 per cent in the year to October, despite a big influx of overseas migrants and international students.
The Victorian capital is going backwards as house prices soar by double-digit figures in Brisbane, Perth and Adelaide.
The combination of these factors means Melbourne is likely to remain a weak spot for mortgage delinquencies over the next year, Ms Wong adds.
Inner Melbourne, with a big supply of high-rise apartments, had a particularly high mortgage arrears rate of 5.37 per cent.
This means one in every 19 borrowers is behind on their repayments.
This is surprising considering units are very affordable in the 3000 postcode. The mid-price of $472,405 is attainable for someone on a below-average salary of $72,678.
Despite borrowers having mortgages that are much smaller than the national average of $636,208, these outer suburbs of Melbourne have high levels of mortgage stress:
Here are the outer suburbs of Melbourne with high levels of mortgage stress
- Pakenham, in Melbournes south-east, with a median house price of $695,574, has a mortgage arrears rate of 4.78 per cent in the 3810 postcode
- Calder Park, in the citys west, has a 4.52 per cent arrears rate in the 3037 postcode near the airport
- Kurunjang, near Melton, has a 4.41 per cent arrears rate in the 3337 postcode, despite having a more affordable mid-point house price of $546,219
- Gilberton, in Melbournes north-east, has a 4.38 per cent delinquency rate in the 3072 postcode, which also covers Preston, where houses typically cost $1.13m
- Cardinia, in the citys outer south-east, has a 4.16 per cent mortgage arrears rate in the 3978 postcode
- Albanvale, in the citys west, has an arrears rate of 4.12 per cent in the 3021 postcode with a mid-point house price of $600,778
- Botanic Ridge, east of Frankston, has an arrears rate of 4.11 per cent in the 3977 postcode with a mid-point house price of $911,327
- Brookfield, in the west, has an arrears rate of 4.04 per cent in the 3338 postcode with a median house price of $589,844
- Bangholme, east of Chelsea, has a 4.02 per cent arrears rate in the 3175 postcode
- Bacchus Marsh, in the west, has a 3.99 per cent arrears rate in the 3340 postcode with a median house price of $632,852
- Doreen, east of Craigieburn, has a 3.94 per cent delinquency rate in the 3754 postcode where $787,288 is the median house price
- Epping, in the north-east, has a 3.89 per cent arrears rate in the 3076 postcode where $708,701 is the typical house price
- Glenroy, near Broadmeadows, has an arrears rate of 3.82 per cent in the 3046 postcode with a median house price of $824,286
The capital of Western Australia has three spots on the Moodys top 20 list for mortgage arrears, in a city where house prices have surged by 22.4 per cent in a year
Perth
The capital of Western Australia has three spots on the Moodys top 20 list for mortgage arrears, in a city where house prices have surged by 22.4 per cent in a year.
The median house price of $838,547 means someone needs to earn $129,000 a year just to get a home loan.
This has seen buyers move to more affordable outer suburbs, where prices have also risen.
Gosnells, 21km south-east of the city, has a mortgage arrears rate of 4.41 per cent in the 6110 postcode with a mid-point house price of $627,188.
Embleton, in the citys north east, has an arrears rate of 4.36 per cent in the 6062 postcode with a median house price of $870,521.
Armadale, in the south-east, has a delinquency rate of 4.28 per cent in the 6112 postcode with an affordable mid-point house price of $578,291.
Regional areas
Albany, 420km south east of Perth, has a delinquency rate of 3.86 per cent.
The 6330 postcode has the highest arrears rate for a regional area, entering the top 20 list in 18th place, in a town with a median house price of $602,209.
Newcastle, a two-hour drive north of Sydney, enters the list in 19th place, with Cameron Park near Lake Macquarie having an arrears rate of 3.83 per cent in the 2285 postcode with a median house price of $920,637.
