Western Sydney homeowners hit hardest by interest rate hikes as mortgage repayments outpace income

Single mother Del Hayes reflects on the cuts she can make to her family’s budget every time mortgage rates rise on her south-west Sydney home.

She swaps name-brand groceries, searches for better internet packages and hopes the sun shines so she can snub the dryer and hang her clothes on the clothesline at her Oakdale home.

“I do not want [mortgage rates] go up because it would just take me longer to pay it back,” she said.

“If I want to take the kids on vacation, it will take me forever to budget for it. I just don’t have anything disposable for me.”

Households in Sydney’s west are facing the same fiscal crisis after the Reserve Bank raised the cash rate from 0.85% to 1.35% on Tuesday – the third rise in as many months.

Some banks have already passed on the increase to customers.

Reimbursements in excess of income at Western Sydney

According to recently released census data, the number of mortgages with repayments of more than $4,000 a month has more than doubled over the past decade in Western Sydney, from 15,632 to 32,287.

An analysis by the non-profit Western Sydney Leadership Dialogue (WSLD) think tank also found that 49% of households in the area have an income of less than $2,000 a week.

Mortgage stress will be a factor for many families in the area over the next two years,” said WSLD Executive Director Adam Leto.

The census found that the number of renters spending more than $650 a week in Western Sydney has also risen sharply to 19,324 in 2021, up 97% from 9,829 five years earlier.

Leto believes budget pressures will hurt the local economy.(Provided: Western Sydney Leadership Dialogue)

The analysis included data on mortgages and rents in 13 council areas including Blacktown, Blue Mountains, Camden, Campbelltown, Canterbury-Bankstown, Cumberland, Fairfield, Hawkesbury, Liverpool, Parramatta, Penrith, The Hills Shire and Wollondilly .

Mr Leto said some people would have to cut spending due to rising housing costs, which would hurt the local economy.

‘This is bad news for business, especially in western Sydney which is so dependent on small businesses as a key part of the economy,’ he said.

“The tipping point is very close”

With the rising cost of mortgages comes rising inflation and cost of living expenses.

Martin North, banking analyst and data scientist at Digital Finance Analytics, said mortgage stress was steadily escalating in Western Sydney.

“Ultimately there is a tipping point and that tipping point is very close now,” he said.

The problem is particularly pronounced in the South West areas of Liverpool and Campbelltown.

A man and a woman hugging in front of a for sale sign in a house
Cheap debt and government stimulus programs have helped many people take out highly leveraged mortgages.(ABC News: Daniel Irvine)

Mr North said cheap debt and government stimulus packages have helped many people take out highly leveraged mortgages but now find themselves vulnerable to “even small rate increases “.

He said borrowers would weigh their options as they hesitate between keeping their property or selling it. Others might be faced with the prospect of default.

But Mr North said the “real epicenter” of the current housing affordability crisis is renters.

“Some real estate investors are now taking the opportunity to raise the rent again because what they’re trying to do is cover the cost of their investment property,” he said.

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