Australia's worst performing suburbs

Establishing where to buy is an important first step but most importantly determining your borrowing capacity is critical, so take heed of Australia’s worst performing suburbs which have earned the title by having the most residents falling behind on their home loan repayments.

Recent figures from Fitch Ratings have highlighted the top 20 suburbs for mortgage delinquency rates, suburbs with the most home loan repayment defaults, which may pique the attention of lenders as well as those using mortgage calculators in order to establish their borrowing capacity.

Twenty postcodes made the list for racking up high values of mortgage arrears as of March 31 2014. Seven of the 10 worst performing suburbs hailed from Victoria, while the worst performing suburb was from New South Wales.

New South Wales’ Budgewoi tops the list

According to Fitch Ratings, NSW has overtaken Queensland for the top spot:

“Budgewoi (NSW) replaced Surfers Paradise as the worst-performing postcode by value of mortgages in arrears, with 3.7 percent of mortgages secured by a property delinquent at end-March 2014”.

“Budgewoi has been among the worst performing postcodes each March and September over the five years since March 2009, with the exception of September 2012.”

Multiple states make the cut

Victoria’s Torquay followed Budgewoi, with 3.7 percent of mortgages held by those 30 or more days in arrears. 

Victoria’s Wallan, Melton and Lynbrook followed closely behind, all with a figure of 3.5 percent. In places six through to 10 were Green Valley (3.4 percent), Palm Cove (3.3 percent), Corio (3.2 percent), Craigieburn (3.2 percent) and Wyndham Vale (3.1 per cent). 

In places 11 through 20, suburbs from Western Australia, NSW, South Australia and Queensland featured. They included Kalgoorie, Castlereagh, Salisbury, Hoxton Park, Jimboomba, Kingston, Caboolture, Richmond, Plumpton and Surfers Paradise, with the proportion of mortgages held by property delinquents ranging from 3.1 percent to 2.9 percent.

Avoid being a repeat offender

Four of the 20 suburbs that made the list featured in the previous report, released in December 2013. They were Budgewoi, Kingston, Melton and Surfers Paradise.

The findings may encourage existing or potential home loan holders to take a good look at their spending habits in order to ensure they don’t default on their mortgages, like many of the property owners in these highlighted suburbs.

In fact, for the most part, lenders tend to be confident about offering home loans. Cameron Kusher, Research Analyst for RP Data elaborated on this point on July 3:

“The preferential treatment by institutions for mortgage lending over businesses is likely due to the ongoing strong performance of mortgages.”

Many homeowners will carry out a loan refinance if their existing repayments are currently too burdensome. Another option to keep up with repayments is to cut down on non-essential spending, from pricey gym memberships to frequent meals from the local takeaway shop. 

Some may spend money to make money, too. Completing some minor or mid-level renovations may help boost your property’s value, which could secure you a strong resale price. You may then refinance and shift into a smaller property with more affordable mortgage repayments.

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