Which Sydney areas are at the highest risk of mortgage stress?

With home loan interest rates having risen significantly following multiple hikes to the national cash rate, some Australian mortgage holders may be under increasing financial pressure. This includes homeowners in parts of Sydney; a city that has struggled with housing affordability.

According to the census data from the Australian Bureau of Statistics (ABS), 14.5 per cent of Australia’s mortgage holders were paying more than 30 per cent of their household income to service their monthly mortgage repayments in 2021 at a national level. This rose to 17.3 per cent in New South Wales, and 19.8 per cent in Greater Sydney.

So, with almost one in five mortgage-holding Sydneysiders at risk of mortgage stress in 2021, which areas were under the most stress, and the least?

Owner with mortgage households with mortgage repayments greater than 30% of household income

Source: ABS

Based on the census data, the statistical regions with the highest percentage of mortgage holders at risk of mortgage stress in Greater Sydney in 2021 included the Eastern Suburbs (19.9%), Inner South West (24.8%), Inner West (20%), Parramatta (24.3%), Ryde (22.5%) and the South West (23.6%).

Conversely, the areas at the lowest percentage of mortgage holders at risk of mortgage stress at the time included the Central Coast (14.7%), the Outer West and Blue Mountains (15.9%), Sutherland (16.7%) and the Northern Beaches (17.1%).

What’s changed since 2021? 

When the census was conducted in August 2021, Australia’s cash rate sat at a record low 0.10 per cent, thanks to emergency cuts from the RBA to help avoid a pandemic-related economic downturn.

Since May 2022, the RBA has hiked the cash rate target by 125 basis points, taking to 1.35 per cent. RateCity research has found that homeowners with a $500,000 home loan balance and 25 years remaining on their mortgage could find themselves paying $333 more in home loan repayments in July 2022 than they were in April 2022.

Economists are widely forecasting that interest rates still have further to rise, some predicting by as many as 75 basis points. That said, there is also some speculation that the acceleration of property price falls could help put the brakes on the cash rate hikes.

How can you tell if you’re at risk of mortgage stress? 

While there’s no hard and fast definition of mortgage stress, one commonly used benchmark (which is used in the census) is when more than 30 per cent of your household income is being used to service your mortgage repayments. This could leave your household finances vulnerable to unexpected changes in your circumstances, such as if interest rates rise, you lose your job, or you have to pay for urgent car repairs. You can use RateCity’s Mortgage Stress Calculator to quickly estimate your risk of financial stress.

If you’re in a situation where you may start to struggle to afford your mortgage repayments, consider contacting your lender to see what options are available, such as taking a repayment holiday or switching to interest-only repayments for a limited time. You could also compare home loans from other lenders and think about refinancing. A mortgage broker may be able to provide more personal advice on which options may best suit your circumstances and goals.

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