The Victorian suburbs to suffer mortgage stress as interest rates soar

Further interest rate rises are set to tip struggling homeowners over the edge across Melbourne. See the rate of mortgage stress in your area and explore our mortgage repayments calculator.

Struggling homeowners in Melbourne’s east and southeast will be hit hardest by yet another interest rate rise expected to be announced on Tuesday.

Economists are tipping the Reserve Bank will lift the cash rate by 0.5 percentage points to 1.35 per cent — the third rise in as many months, with even more pain on the way this year.

The Herald Sun can reveal Moorabbin homeowners will feel the sting of that increase the most, according to a new report from Digital Finance Analytics and online home loan marketplace Joust.

A 0.5 per cent rise would leave 45.44 per cent of the 1063 borrowing households under mortgage stress.

This is followed by 33.46 per cent of borrowing households in Bend of Islands, 33.26 per cent in Nar Nar Goon, 30.45 per cent in Strathmore Heights and 26.94 per cent in Williamstown.

Other suburbs that will be stretched to the limit include Parkville, Caulfield South, Deepdene, Kew and Wonthaggi.

The Herald Sun in May revealed — prior to the Reserve Bank lifting the cash rate for the first time in more than a decade — that six of the top 10 postcodes nationwide for mortgage stress were in Victoria.

DFA’s new report shows that if interest rates rise by a further 1 per cent, all of the 246 borrowing households in Sassafras will be in mortgage stress.

This is followed by 66.92 per cent of borrowing households in Bend of Islands, 66.52 per cent in Nar Nar Goon, 58.35 per cent in Toorak and 54.56 per cent in Moorabbin.

Queenscliff, Balwyn North, Blairgowrie and Fairhaven are other suburbs that will be significantly hit.

Joust chief executive Carl Hammerschmidt said the data was on top of the 451,000 homeowners struggling to make their repayments before the 0.5 per cent uplift.

He said the number of households battling mortgage stress was concerning.

“There is a whole generation of borrowers who have never seen a rate rise,” Mr Hammerschmidt said.

“As we go into a cycle of potentially multiple increases over 12 to 18 months, combined with the pressures of growing cost-of-living, this is concerning for literally hundreds of households across the country.”

“That is why it is important that borrowers are consistently shopping around to ensure that they have the best rate possible from their existing lender.”

Reserve Bank Governor Philip Lowe has indicated the cash rate would likely increase to 2.5 per cent, up from the historic low during the pandemic of 0.1 per cent.

“How fast we get to 2.5 per cent, indeed whether we get to 2.5 per cent, is going to be determined by events,” he said last month.