Rising interest rates and the surging cost of living are putting more Australians under mortgage stress, according to a new report.

PEXA’s Emerging Mortgage Risk report has found that families in certain locations around Australia are allocating 40-60% of their income to meet their home loan repayments – putting them at a high level of mortgage stress.

The report found there were 181 postcodes in New South Wales where homeowners are likely to be at high risk of missing a mortgage repayment by May – with the highest risk suburbs including Northbridge (71.8%), Dural (71.4%) and Avalon Beach (69.4%).

This was a significant increase compared to the prior quarter, where only 119 postcodes were deemed at high mortgage risk.

This is an increase of 52.1%. The pain being experienced by mortgage holders across NSW was highlighted even further by borrowers needing to pay an extra $15,985 per year on average to meet loan repayments, up 62.3% from December 2020.

In Victoria, 22.3% of all postcodes in the state were at high risk of missing a repayment, up from just two suburbs in December 2020.

An additional $13,327 (up 67.3%) was required by borrowers to meet their home loan requirements compared to December 2020. High-risk locations in Victoria include Balwyn (74.2%), Balwyn North (71.4%) and Canterbury (70.2%).

However, Queensland showed a lower risk profile than the other east coast states, with only 19 postcodes expected to move into high mortgage risk by May this year.

The most at-risk suburbs in Queensland were Noosaville (58.3%), Maleny (57.1%) and Tallebudgera (56.9%), while borrowers now need an extra $11,567 (up 67%) to meet their home loan commitments compared to December 2020.
 

PEXA’s head of research, Mike Gill, said with interest rates continuing to rise and the cost of living squeezing the budgets of households, there has been a pronounced spike in the number of families facing more immediate mortgage risk.

Mike Gill said, “In addition to these factors, with an estimated 800,000 fixed-rate loans due to expire in 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.”

The report calculated mortgage stress by assessing the median monthly home loan repayments as a proportion of the median monthly family income for each postcode, before categorising the risk into low (0-20%), moderate (20-40%), high (40-60%), or very high (>60%).