5 per cent of borrowers in South Melbourne mortgage stressed

Mortgage stress is rising in Australia but it’s not always in the places you’d expect.

Borrowers in affluent South Melbourne are among the most mortgage stressed in Australia, new data has revealed.

The report, from ratings agency Standard and Poor’s, shows that 4.93 per cent of mortgagees in inner-city South Melbourne are at least one month behind in repayments, ranking the suburb fifth in Australia for mortgage stress.

The most financially stressed suburb in Australia at June 30 was Victoria’s Broadmeadows, with 6.85 per cent of loans in arrears, followed by waterside Dolls Point in southern Sydney at 6.49 per cent.

Suburbs west of Sydney, Bonnyrigg and Katoomba in the Blue Mountains took out the next two places, with loans in arrears of 6.12 per cent and 5.93 per cent, respectively.

In total, the top ten featured five suburbs in NSW, three in Victoria, and one each in Queensland and WA.

On a regional basis, outback Queensland has the highest level of home loans at least one month behind on repayments, followed by south-eastern Tasmania, Shepparton in northern Victoria, outback WA, Darwin and south-western Sydney.

Erin Kitson, an analyst at Standard and Poor’s Global Ratings, told news.com.au that based on its interest rate forecasts, the number of people behind on their mortgage was expected to continue to increase, peaking by mid 2024.

The biggest factor in keeping mortgage stress at bay is the unemployment rate, she said.

“Strong employment conditions and job mobility continue to underpin low levels of defaults,” she said.

South Melbourne has among the highest number of home loans in arrears. Picture: realestate.com.au.

New research from Roy Morgan also supports the importance of jobs in the mortgage stress equation.

The research found a record high 1.5 million – or 29 per cent – of mortgagees were at risk of mortgage stress in the three months to July.

This figure is 642,000 higher than a year ago, and represents a new record high.

The previous high – of 1.46 million people in the three months to May 2008 – was during the global financial crisis.

The latest data encompassed two interest rate hikes of 0.25 per cent each, which took official interest rates to 4.1 per cent in June.

Since then, the Reserve Bank of Australia (RBA) has kept interest rates on hold.

With all eyes on what the RBA will do with interest rates when it meets on Tuesday September 5, Roy Morgan CEO Michele Levine warned new inflationary pressures were building in the economy.

Soaring petrol prices are adding to Australia’s inflation woes. Picture: NCA NewsWire/John Gass.

“During mid-August the average retail petrol price in Australia increased to over $2 per litre for the first time since July 2022,” she said.

She added that on two occasions during 2022, when average retail petrol prices increased to over $2 per litre, inflation expectations also increased.

“The increases to petrol prices are being driven by a decline in the value of the Australian dollar which has now dropped below 65 US cents,” she said.

“As long as the Australian dollar stays low and petrol prices stay high, and even increase further, there will be additional inflationary pressures in the economy.

“Therefore, although many have suggested the RBA has finished its cycle of interest rate increases, the low Australian dollar and high petrol and energy prices adding to inflation may force their hand for further interest rate increases in the months ahead.”

Roy Morgan is forecasting two more interest rate rises to come – in September and October.

Originally published as 5 per cent of borrowers in South Melbourne mortgage stressed