$20k a month mortgage payments ‘the new normal’

Mortgage payments of around $20,000 every month could become ‘the new norm’ in parts of Sydney as the RBA continues to hike up interest rates.

Sydney’s most vulnerable homeowners have been dealt the hardest financial punch in the gut from this week’s interest rate hike – and many won’t feel the full pain until Christmas.

The unprecedented rise will drain up to $140 a month extra from the pockets of homeowners in regions where most borrowing households were already struggling to pay their loans, new PropTrack data shows.

The latest hike – one of 13 since April 2022 – will also leave some cash-strapped households saddled with mortgage repayments that are nearly double what they were last year.

Most of these households were in Western Sydney regions that had some of the most elevated levels of mortgage stress even before the Reserve Bank announced the latest 0.25 per cent cash rate increase.

$20k a month mortgage repayments will become the new norm in parts of Sydney.

They were also regions where over 70 per cent of borrowing households were already financially “underwater”, spending more than they were earning, according to recent Digital Finance Analytics research.

They included western regions Blacktown, Campbelltown, Liverpool and Camden, along with parts of the Hills district, Penrith and Parramatta.

The latest hike, combined with the previous rate increases, also led to extreme changes in costs for new house buyers, with $20,000 a month repayments becoming the norm in parts of the northern beaches, north shore and eastern suburbs.

“The pressure of a 13th rate hike might simply be too much,” said Effie Zahos, money expert at comparison group Canstar.

Standard and Poor’s mortgage analyst Erin Kitson said arrears, while still relatively low, were starting to increase, particularly in Sydney’s southwest.

“You might see more financial stress where household debt to income ratios are higher,” Ms Kitson said.

“(Arrears) tend to peak after Christmas in the early new year, when more financially stretched borrowers might go behind on their mortgage. It tends to peak in February or March.”

PropTrack indicated a Campbelltown buyer paying off a loan on a house priced at the current median would need to spend $111 a month more on their mortgage after the recent interest rate rise.

Blacktown house owners would need to pump $138 a month extra into their loans if paying the median for the area, while the average Liverpool owner would need an additional $135.

House owners in Fairfield, Penrith and Camden would face similar mortgage repayment increases of about $120-$138, on average.

These numbers are on top of the increases that homeowners would have incurred following the previous rate hikes that started last year.

Recent DFA data showed close to 80 per cent of borrowing households in Blacktown were spending more than they were earning before the rate rise. The recent hike has pushed that to 87 per cent.

Nearly 95 per cent of Campbelltown borrowers were financially underwater before the rise and the proportion has now swelled to 99 per cent.

Housing Industry Association chief economist Tim Reardon said the latest cash rate hike was “unnecessary” and could cause further harm down the road.

He noted that it could “cause further contraction in new home building, constraining the supply of new homes” – all at a time when vital new builds were needed to accommodate the growing population.