Victoria mortgage stress: The suburbs hit hardest revealed

Melbourne’s housing market is clawing its way out of being the nation’s worst for homeowners falling behind on their mortgage — but some areas are still struggling.

Victoria is on the cusp of shrugging off its mantel as the nation’s worst state for mortgage pain in a further sign home prices will grow — and forced sales fade.

The state had been the hardest hit in the nation by interest rate hikes, with dozens of homes worth tens of millions of dollars listed under mortgagee instructions since June last year according to realestate.com.au records.

Multiple credit rating groups have also tagged Victorian suburbs as the nation’s worst for mortgage arrears, with ClearScore this month noting Craigieburn as Australia’s top area for homeowners behind on their home loan repayments.

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S&P Global named Narre Warren’s 3805 postcode as the nation’s most troubled with more than one in 50 loans behind.

Point Cook, Hoppers Crossing, Craigieburn, Cranbourne and Pakenham all made their top 10 worst areas list for mortgage arrears nationwide.

But the data for the wider state shows most regions are improving, with only Melbourne’s south east region and Geelong yet to have pass the peak.

S&P Global credit rating agency data indicates that across most of the state home loan pain peaked between June last year and March this year and has since been improving, with latest data statewide indicating about one in 100 home loans were behind on their repayments.

This Carrum house sold for $523,000 is among those sold under mortgagee instruction.

A $390,000 two-bedroom Airport West apartment is one of the most affirdable sold as a result of mortgage stress.

Melbourne’s north west was the city’s hardest hit, with 2.93 per cent of homeowners in the red last year. While it has improved, it is still the state’s hardest hit area today with 2.26 per cent of households struggling with their home loan in an area of the city spanning from Keilor East and Coburg North to Gisborne and Romsey.

Despite overarching improvements, most parts of the state still have arrears levels at close to twice what they were in March, 2022, before the Reserve Bank commenced hiking rates.

S&P Global director Erin Kitson said the mortgage pain peak was now in the rear view mirror for most, and lenders were likely to become more generous — potentially having flow on effects to home prices.

The finance specialist said that as interest rates dropped, lenders traditionally became more competitive — and were likely to be more confident in this regard as home values rose, giving those who had fallen into arrears more options both to sell or to refinance.

Sold for $700,000, this Cranbourne East home was also marketed as a mortgagee sale.

Advertised as a “pre-mortgagee sale”, this Keilor Downs home sold for $605,000.

“So I think there will be fewer mortgagee in possession sales,” Ms Kitson added.

However, she warned the share of the nation in arrears would not return to the historic low levels recorded prior to the interest rate hikes that started in May, 2022.

Typical levels are around 1 per cent.

However, Geelong and Melbourne’s south east are currently both at their highest level of arrears, at about 2 per cent — close to twice what they were in March 2022, before the Reserve Bank commenced hiking interest rates.

Mortgage Choice director David Thurmond works in Melbourne’s south east. While most people were speaking to him about buying their first home — one in 20 of his clients were needing to refinance through a “nonconforming lender”, those who back people with poor credit scores or who have gone bankrupt.

“And we are still seeing clients who have hardship marks against their home loans, or arrears payments — and over the past two years that’s become more common,” Mr Thurmond said.

The broker said in many instances those struggling were in their 30s or 40s and had lost income recently or had unexpected expenses.

A three-bedroom South Melbourne apartment sold for $790,000 was another of those sold under mortgagee orders in Victoria.

23 Wilkins Close, Corio, is currently listed for mortgagee sale with a $570,000 asking price.

“A lot of them are on one income, with mum staying at home — and I’m not surprised to find a lot of them would be feeling the pinch,” he said.

Area Specialist Narre Warren’s Hossein Gholami said the area had been inundated with homes for sale this year, but with buyers in equal measures they had also been selling.

While most would have been families looking for their next step on the property ladder, there were some who were selling as a result of divorce or from mortgage stress.

“But not to the stage where their lender was saying they have to sell,” Mr Gholami said.

Loan Market mortgage broker Jacob Decru said with three rate cuts since February, some owners who had been behind were catching back up.

“If you had a $500,000 mortgage at 6 per cent that was $3000 a month, but now it’s down by about $300 to $2,685 — and that’s a lot of relief,” Mr Decru said.

He added that while relatively few had been forced to sell, many today were asking if they should fix their rate now as they sought a more secure financial future.

In Melton, this three-bedroom house sold for just $431,000 after being listed by the mortgagee.

Experts advise those still struggling with their mortgage to take action as soon as possible, as waiting can make things far worse.

“I think they are a bit damaged,” he said.

With the relief being felt, those who had coped with the rate hikes better were now inquiring about selling and bridging finance as they plotted their next property purchase, he added.

“So they are now looking to upsize to a bigger family home,” Mr Decru said.

Melbourne’s top postcodes for mortgage arrears

Fountain Gate 3805 — 2.79%

Point Cook 3030 — 2.19%

Craigieburn 3064 — 1.75%

Cranbourne 3977 — 1.74%

Pakenham 3810 — 1.74%

Hoppers Crossing 3029 — 1.71%

Supplied: S&P Global

How Victorian home loan payments have responded to rate hikes

Supplied: S&P Global

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