What life is like in Melbourne’s most mortgage-stressed suburb

Home owners in Craigieburn have been taking on extra shifts at work and cutting back on discretionary spending to keep up with mortgage repayments as many feel the pinch in the lead up to Christmas.

Craigieburn has topped the list of Australian suburbs for mortgage arrears, with 2.96 per cent of home owners falling more than 30 days behind on loan repayments, S&P Global Ratings data for the September quarter shows.

Property owners in Pakenham (2.16 per cent), Point Cook (1.98 per cent) and Hoppers Crossing (1.98 per cent) are also falling behind on their monthly repayments.

Craigieburn home owner and mother-of-one Maddy, who declined to give her surname, said she decided to return to work earlier than expected to bring in some extra cash.

Maddy, who bought a home with her partner during COVID lockdown, said their mortgage had since become more expensive with interest rate rises.

“I’ve been working part-time to make extra money,” the 29-year-old said. “Times are tough, and it feels especially hard around Christmas.”

Craigieburn resident Maddy, pictured with son Noah, has returned to work earlier than expected to make some extra money. Credit: Wayne Taylor

First home buyer Steven Russell, 42, has been forced to take on extra shifts to cover upcoming mortgage repayments for his new home in Beveridge, near Craigieburn.

“To pay for this house, I have to do extra shifts to ensure that I actually have money to save, as well as being able to pay the mortgage,” Russell, a police officer, said.

“Interest rates are going to be a killer, but I’m sick of paying dead money to an ever-rising rental market.”

Russell said he had been feeling the pinch when it came to the rising cost of groceries and other daily expenses.

First home buyer Steven Russell has taken on extra shifts to help cover his mortgage repayments.Credit: Wayne Taylor

“Pre-pandemic, you could go to the supermarket and not stress about the price of groceries. Now you have to stress about every little cent,” he said.

Business owners Daras Singh, 51, and Sandhya Saini, 50, said they had been forced to dip into their savings to cover the mortgages on their two Craigieburn properties.

Craigieburn business owners Daras Singh and wife Sandhya Saini have been forced to dip into their savings to help cover their two mortgages.Credit: Wayne Taylor

Singh said they felt lucky to be able to fall back on their savings, but it meant they had to pull back on spending for non-essential items, including overseas holidays.

“We are dipping into our savings,” he said. “We were lucky, to be really honest, because we had that, and we didn’t have to cut too much from our existing expenses.”

The new data comes as the Reserve Bank prepares to meet next week and is tipped to hold rates steady at 4.35 per cent. Cuts are seen as unlikely before February and possibly May.

S&P Global Ratings analyst Erin Kitson said home owners nationwide had been affected by rising interest rates, but softening house prices, a weakened economy and extended lockdowns were behind the number of people falling behind on mortgage repayments in Victoria.

“Borrowers in Victoria probably went into this tightening [interest rate] cycle from a slightly weaker position, given we had longer lockdowns, and that clearly would have had an impact on borrowers’ cash flows, particularly depending on the nature of their employment,” she said.

Kitson said Melbourne’s softening housing market had made it difficult for home owners to sell their property for a gain, or refinance their home loan, if they can no longer afford to service the mortgage.

“Property prices impact mortgage arrears when [prices] start to decline. It can affect how easy it is for a borrower to sell a property without realising a loss ... which means you might be forced to stay in arrears for longer,” Kitson explained.

“The other way that property price dynamics impact arrears is how it can influence refinancing prospects. “When you have property prices starting to become weaker, that can affect your loan to value ratio and therefore how easy it is for you to refinance a loan.”

Kitson also pointed to Victoria’s unemployment rate, higher than other states, as a reason for borrowers falling behind.

“There is a big, big connection between employment and mortgage arrears because clearly a loss of income is a key cause of mortgage default,” Kitson said.

Victoria’s unemployment rate was 4.5 per cent as of October, Australian Bureau of Statistics data shows.

Red Maple Finance founder, director and mortgage broker Nariman Amalsadiwala has clients in Melbourne’s west and north, including Craigieburn. He said home owners struggling to make repayments were holding out for a drop in interest rates next year.

Amalsadiwala said he had noticed clients avoiding non-essential spending in order to prioritise mortgage repayments, with some opting to refinance their home loans.

“They are finding it more and more difficult to keep up with the payments,” he said. “They are constantly looking for ways to consolidate or reduce the payments, whether it’s refinancing or combining, say, the car loan or the credit card and putting it on the home loan to stretch it further.”

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