NSW under most mortgage stress

June 17, 2011

Borrowers in NSW are on average closest to suffering mortgage stress compared to those living in the other states and territories, new research has revealed.

That’s because NSW homeowners are paying 27 percent of their average household income to mortgage repayments, which is more than any other state in the country, according to RateCity and Australian Bureau of Statistics (ABS) figures.

Damian Smith, chief executive of RateCity, said it’s little surprise that NSW scored the worst for borrowers who are most at risk of mortgage stress, which is when home loan repayments account for more than 30 percent of income.

“While we found that the average mortgage in NSW didn’t increase the most out of all other states, NSW home owners still have the highest average mortgage size of $319,300,” Smith said.

“And coupled with an average household income of $100,482 – which is just above the nation’s average of $98,044 [RateCity projected estimate based on ABS data] – NSW borrowers face the toughest outlook for rising interest rates.”

How your state stacks up
Victorian and South Australian borrowers came in behind NSW in the mortgage stress stakes, both with 25 percent of household incomes on average contributing to mortgage repayments.

Queenslanders and Tasmanians contribute 24 percent of incomes on average to repayments, followed by Western Australians at 23 percent and Northern Territory residents at 22 percent. Borrowers in the ACT have the least mortgage stress in the nation, contributing just 19 percent of household income on average to their home loans.

But should there be a 50 basis point rate rise before the end of the year – as many market experts anticipate – the average borrower in NSW will be on the verge of mortgage stress.

“It means that the average NSW borrower will be heading for trouble with a percentage of income to repayments hitting 29 percent and Victorian mortgagees are closely behind with 27 percent of average income towards repayments,” Smith said.

He said given that these are averages, it’s likely that many homes in NSW and other states are already feeling the pinch, contributing a third or more of incomes to their mortgages.

“Whether you’re a borrower in the ACT or in NSW, you should be prepared for higher mortgage repayments by the end of this year. Start by using comparison websites like RateCity to make sure you’re getting a good deal on your home loan and talk to your lender – you’ll be surprised at how aggressively most lenders are willing to negotiate to retain customers,” Smith said.

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