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.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 Star Customer Ratings |
| Promoted | Disclosure | |||||||||
5.99% p.a. | 5.90% p.a. | $2,995 | Principal & Interest | Variable | $0 | $0 | 80% | Apply in minutes |
| Promoted | Disclosure | |||||||||
6.09% p.a. | 6.11% p.a. | $3,027 | Principal & Interest | Variable | $0 | $250 | 60% |
| Promoted | Disclosure | ||||||||||
5.69% p.a. | 6.16% p.a. | $2,899 | Principal & Interest | Fixed | $0 | $530 | 90% |
| Promoted | Disclosure |
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
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!
Harry O'Sullivan
Denise Raward
Rachel Horan
