Revealed: Australia’s worst suburbs for mortgage stress

Australia’s housing dream is rapidly turning into a nightmare for almost two million households, with new data revealing a terrifying surge in mortgage stress that experts warn could fuel a rise in crime and family violence.

Despite recent RBA rate cuts, the relief is proving to be a mere band-aid on a bullet wound, as the relentless cost of living crisis wipes out any financial reprieve, forcing some desperate homeowners into a dangerous spiral of further credit debt.

The grim reality is laid bare by Digital Finance Analytics (DFA), showing a staggering 1,865,868 households nationally are grappling with mortgage stress.

The situation is particularly dire in Tasmania, where 56.9 per cent of property owners are struggling to meet their household debt obligations.

South Australia isn’t far behind at 52.7 per cent, followed closely by Victoria (52.4 per cent), Western Australia (51.5 per cent), and New South Wales (51.2 per cent).

Even Queensland (43.2 per cent), the Northern Territory (42.2 per cent), and the ACT (39.7 per cent) are feeling the intense squeeze.

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AUSTRALIA’S TOP MORTGAGE STRESS SUBURBS

Source: Digital Finance Analytics

DFA data scientist and banking analyst Martin North painted a chilling picture of the consequences.

“This is because of a concentration of new purchasers, especially first time buyers, plus home and land packages which tend to have high loan to value loans. Other areas are also seeing pressure, though,” he said.

“(Mortgage) stress shows households have cash flow pressure, so they cut back on spending, and hunker down, leading to lower economic activity. If this continues some people may eventually default on their mortgage, but this process takes a long time, and banks try to ‘extend and pretend’ by extending loan terms or offering interest only,” he explained.

“(It also means) more people (are) working more jobs, more social pressure, and eventually higher crime and family violence.

“High stress also tends to limit future price growth, to some extent and banks sometimes reduce their willingness to lend. This can create no-go zones.”

The latest Consumer Stress Barometer from illion, an Experian company, corroborates the escalating crisis, revealing that default mortgage-holder risk in Victoria has surged by 7 per cent in the June quarter, with Western Australia also seeing a 1 per cent rise.

While New South Wales, South Australia, and Queensland saw marginal improvements, the national relative default risk has still climbed by 1 per cent.

Source: Experian

Barrett Hasseldine, head of data science at Experian, confirmed the severity of the situation. “We’ve been putting together this stress barometer for a number of years now and the thing that stuck out the most for me is the insights we’re seeing in our data over the past quarter. (They) are showing the greatest, most elevated level of credit stress among consumers since Covid,” he said.

Mr Hasseldine highlighted a worrying trend of people resorting to credit cards to survive. “Earlier this year, we saw an increase in the number of people taking out credit cards,” he said.

“We’ve seen that drop since then but those were probably taken out to help households to make ends meet because of the increased costs, which have for many households been outstripping wage growth.

“We’ve now started to see many of those credit cards start to fall behind on their repayments. We’re starting to see that some of those missed payments are worsening, because obviously, mortgage stress has gone up.”

The data paints an even more alarming picture at a local level.

In New South Wales, a staggering 100 per cent of homeowners in Campbelltown, Riverstone, and Lane Cove, along with Berwick in Victoria, are currently experiencing some form of mortgage stress, meaning their spending is consistently eating into their savings.

Campbelltown in NSW is one of Australia’s worst mortgage stress hotspots.

Queensland’s hotspots include Geebung (93.9 per cent) and Pine Mountain (90.9 per cent), while Paralowie in South Australia sees 89.5 per cent of homeowners under pressure. Tasmania’s Riverside is also deeply affected, with 83.3 per cent of homeowners in stress.

The outlook offers little comfort.

Australia’s four major banks are forecasting that the Reserve Bank will keep the interest rate on hold at 3.6 per cent in November and December.

There may be no further cuts until mid-2026, meaning millions of Australians face a prolonged period of financial hardship.

“The cash rate coming down will absolutely help in terms of being able to help mortgage holders stay on top of their repayments,” Mr Hasseldine acknowledged.

However, he also warned of a potential double-edged sword: “That does mean that spending increases again, which could lead to rental prices going up again more quickly and the cost of goods going up more quickly again, increasing (financial) stress. So I think (another rate) cut would help but I don’t think there’s a silver bullet.”

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