Spike in mortgage risk looms for 2023: PEXA

PEXA’s Emerging Mortgage Risk report has found that NSW is set to have nearly 181 postcodes — 46.1 per cent of all suburbs in the state — classified as being at high mortgage risk by May 2023.

Those in higher-risk postcodes are being forced to dedicate a higher percentage of their income to meet repayments, with families from both high and low-income areas being affected, according to the report.

The report looked into the effects of the current economic environment, such as rising interest rates, steeper house prices, and ongoing cost-of-living pressures on home owners who have purchased residential property between January 2020 and February 2023.

The study defines “mortgage risk” as how difficult it is for families within a postcode to honour home loan repayments and is calculated by assessing the median monthly home loan repayments as a proportion of the median monthly family income for each postcode.

The majority of these high-risk postcodes were located in Greater Sydney, with Northbridge (2063) leading the list, followed by Dural (2158) and Avalon Beach (2107).

This trend was somewhat replicated in Victoria, with the postcodes of Balwyn (3103), Balwyn North (3104), and Canterbury (3126) topping the mortgage risk list.

However, this pattern was not observed in Queensland. Instead, it was the regional postcodes that posed higher risk, particularly in Noosaville (4566), Maleny (4552), and Tallebudgera (4228).

According to the study, NSW borrowers will require an extra $15,985 per annum on average to meet their loan repayments, an increase of 62.3 per cent from December 2020, with repayments for those in Northbridge and Canterbury being projected to rise by more than $60,000 per year.

Home owners in Victoria are expected to front up an additional $13,327 per year (up 67.3 per cent), while Queensland home owners will see a 67 per cent increase to repayments at $11,567 per year.

Head of research at PEXA, Mike Gill, said: “In addition to these factors, with an estimated 800,000 fixed rate loans due to expire during 2023 — and reset at a significantly higher cost — it’s easy to see why refinance volumes are at a record high as mortgagees seek to strike a better deal. It’s clear that lending pressure is set to stay in the months ahead.”

Mortgage stress at decade high

In addition, market researcher Roy Morgan confirmed in its January mortgage stress report that 23.9 per cent of mortgage holders were “at risk” of stress.

The research found that an estimated 1.1 million mortgage holders in the three months to December 2022 entered the “at risk” category following the Reserve Bank of Australia’s December rate hike that brought the cash rate to 3.1 per cent at the time.

This brought the risk of mortgage stress to its highest level since July 2013 and above the long-term average of 22.8 per cent stretching back to early 2007.

IMF ranks Australia as second highest for housing market risk

In its World Economic Outlook: A Rocky Recovery report, the International Monetary Fund (IMF) ranked Australia’s housing market as being the second most high-risk country of 27 countries, second only to Canada.

The IMF said Australia was at highest risk for household debt levels (as a share of gross disposable income) and cumulative real house price growth.

[RELATED: Australia ranks second highest for ‘housing market risk’: IMF]