What Suburbs are most affected by Mortgage Stress in Australia?

Several Australian banks have hiked their home loan interest rates, adding almost $38 a month on average to a $400,000 mortgage. Fortunately, most homeowners were able to cushion this impact. However, if more of such unexpected rate hikes follow thousands of Australian households might find themselves under mortgage stress.

Mortgage Stress in Australia: Suburbs that are most affected

Mortgage Stress by Postcode in Australia

A new report by Gateway Bank reveals 56 percent of Australians are under mortgage stress and consider their home loan to be a burden that limits their lifestyle. According to DFA, 30.7 percent of owner-occupied (1,008,000) households across Australia are estimated to be under mortgage stress. DFA also estimates that over 61,000 households risk 30-day default in the next 12 months.

In it’s latest report released this November, DFA shared the postcodes with the highest percentage of mortgage stress in Australia. The top five postcodes include:

  • The area around Chipping Norton and Liverpool, 2170, with 7,732 households in stress and 116 risking default
  • Tapping in WA, 6065, with 7,409 in stress and 298 risking default
  • Campbelltown in NSW, 2560, with 6,781 households in stress and 110 risking default
  • Toowoomba, in Queensland, 4350, with 6,437 households in stress and 256 risking default
  • Berwick and Harkaway in Melbourne, 3806, with 5,267 households in stress and 143 risking default.

So, What is Mortgage Stress and what causes it?

A household can be defined as ‘stressed’ when the household income does not cover ongoing costs. If you are applying 30 percent or more of your net income towards servicing your home loan, you could be reeling under mortgage stress.

In Australia, home loan rates have been quite low for the past few years. Currently, home buyers can find home loans starting as low as 3.70 percent per annum, which is much cheaper than the rate of 7.00 percent per annum in the early 2000s. Unsurprisingly, these lower interest rates prompted many Australians to enter the real estate market. However, in the face of slow wage growth, increased living costs, and unexpected rate hikes – many households are finding it difficult to meet the increased repayments.

As a result, many homeowners seek to refinance their home loans to lower rates and put more debt on their credit cards while reducing their household spend as much as possible. Those in severe stress may also seek hardship assistance or be forced to sell their homes.

Take Mary’s example. Like any other average Australian couple, Mary and Joe dreamt of owning a home and purchased one in Brisbane three years ago. A financially conscious couple, they never had too much difficulty managing their mortgage, until now, when their bank suddenly increased the interest rate on their mortgage.

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“We use a tracking app to ensure every cent is accounted for – and avoid mortgage stress by prioritising our mortgage repayment and basic monthly expenditure,” explains Mary, who is perturbed by her rising household expenditure as well as the increased rate on her mortgage. “If this is one of the many rate hikes to follow, I am not sure whether we would be able to afford our mortgage in the near future or not,” she says.

To improve their situation, Mary and Joe decided to refinance their home loan to a lower rate. “We compared home loans on HashChing to find several lenders offering lower rates than what we were paying to our bank. We chose a deal and were immediately put in touch with a broker who did all the paperwork on our behalf and helped us move to a rate that is half a percent lower than what we were paying at that time,” says Mary, recounting her experience with HashChing.

However, not everyone is as lucky as Mary and Joe. According to DFA, “significant numbers of households have had their potential borrowing power crimped by lending standards belatedly being tightened…and more than 40% of those seeking to refinance are now having difficulty.”
A broker survey by HashChing supports the above statement and reveals that one in four homeowners who were given home loans last year would fail the new living expenses test employed by banks presently.

How do you combat mortgage stress living in Australia?

Before you even start looking at home loans, work out your borrowing capacity using our Borrowing power calculator and the repayments you can afford monthly. It is suggested to add a 3 percent interest rate buffer while calculating your repayment amount. You could also speak to a broker to understand your finances better.

The second step is to find a home loan that is cheap, as well as tailored to your financial condition. You can find home loans starting as low as 3.70 percent per annum through HashChing’s home loan comparison. Once you choose a home loan, we will put you in touch with a verified mortgage broker in your area who will guide you, and do all the legwork on your behalf. Even if you are an existing homeowner looking to refinance your home loan, a mortgage broker can help you evaluate your options and also increase your chances of approval, as they are aware of the requirements of various banks. Speak to a mortgage broker to empower your home loan journey now.


By Vidhu Bajaj,
HashChing Content Writer



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