Ordinary Melbournians are struggling under draconian lockdowns with up to 97 per cent of home borrowers unable to pay their mortgages in some suburbs.
Melbourne is home to seven of Australia’s ten worst postcodes for mortgage stress where home borrowers can’t service their loan and pay their bills on time.
Victorian Labor Premier Daniel Andrews’ Stage Four lockdowns are financially hurting young, growing families in the suburbs and the prospect of more restrictions risks causing more businesses to close.
The big banks in September are also auditing borrowers to see if they can start repaying their loans after six-month mortgage repayment holidays – as unemployment hits double-digit figures for the first time since 1994.
Ordinary Melbournians are struggling under draconian lockdowns with up to 97 per cent of home borrowers unable to pay their mortgages in some suburbs
In Australia’s worst-affected suburb Pascoe Vale, in Melbourne’s north, 97 per cent of borrowers are suffering from mortgage stress, Digital Finance Analytics data showed.
Australia’s worst suburbs for mortgage stress
1. Pascoe Vale, Pascoe Vale South in Melbourne’s north: 97 per cent
2. Narre Warren East, Narren Warren North in Melbourne’s outer south east: 96.8 per cent
3. Grasstree Hill, Honeywood in Hobart’s north: 96.6 per cent
4. Belgrave, Tecoma in Melbourne’s outer south east: 96.1 per cent
5. Armadale, Armadale North in Melbourne’s inner east: 95.6 per cent
6. Aberfeldie, Essendon in Melbourne’s north: 95.2 per cent
7. Rose Bay in Sydney’s east: 94.5 per cent
8. Mount Evelyn in Melbourne’s outer north east: 94.1 per cent
9. Endeavour Hills in Melbourne’s outer south east: 93.8 per cent
10. Kambah in Canberra’s outer south: 93.5 per cent
Source: Digital Finance Analytics data on the proportion of borrowers by suburb who were in mortgage stress in August 2020
At Narre Warren, in Melbourne’s outer south east, 96.8 per cent of mortgage holders are in dire straits.
The awful story was similar in nearby Belgrave with 96.1 per cent of borrowers struggling in the suburb that is home to the closed Puffy Billy steam train tourist attraction.
Rich and poor suburbs alike are in trouble in Australia’s second biggest city with 95.6 per cent of borrowers struggling in upmarket Armadale as a similar proportion, 95.2 per cent, buckle to financial pressure in working class Aberfeldie and Essendon in the city’s north.
Outer suburbs more than 30km from the city centre were also a red zone with 94.1 per cent of mortgage holders financially treading water in Mount Evelyn as 93.8 per cent of borrowers at Endeavour Hills wondered about their next bill.
Digital Finance Analytics principal Martin North said this was not just an economic crisis – with many borrowers a month away from disaster.
‘The pressure on these households is not just financial, it translates into both social and economic pressures as well,’ he told Daily Mail Australia.
Since the COVID-19 pandemic, the federal government has spent $164billion on stimulus programs.
Mr North feared the problem of mortgage stress would worsen as government crisis-spending programs were wound back as unemployment rose.
The Australian Banking Association has this week also confirmed 450,000 home and small business borrowers, on six-month mortgage repayment holidays, would be audited in September and October to see if they could service their loans again.
‘The banks are already asking hard questions of some people,’ Mr North said.
‘In fact, I’ve got some feedback from speaking to individuals in my focus group that the banks are already putting pressure on them to consider selling their property.
‘In other words, rather than actually just saying, “We’ll give you another six-month extension” they’re actually suggesting they should be proactive and sell the property.
Victorian Labor Premier Daniel Andrews’ Stage Four lockdowns are financially hurting young, growing families in the suburbs and the prospect of more restrictions risks causing more businesses to close
Melbourne is home to seven of Australia’s ten worst postcodes for mortgage stress where home borrowers can’t service their loan and pay their bills on time. Pictured are people exercising at Albert Lake in inner Melbourne
‘There’s going to be more pressure on people – September, October, November – to put their property on the market.’
By March, the extended mortgage holidays are set to end – creating a new round of chaos.
‘That will be the next critical, crunch point too,’ he said.
‘We can assume that this is going to be the trend, not just for a few months but potentially for two or three years.’
The prospect of forced sales is also worrying the Reserve Bank of Australia, which predicted in a paper published last month that 40 per cent house price falls were ‘an extreme but plausible scenario’ – echoing what happened in the United States, Spain and Ireland after the Global Financial Crisis more than a decade ago.
The big banks in September are also auditing borrowers to see if they can start repaying their loans after six-month mortgage repayment holidays – as unemployment hits double-digit figures for the first time since 1994. Pictured is a homewares store closing down in Melbourne in September 2020
Propertyology head of research Simon Pressley said the lockdowns were likely to see 30,000 Melbourne residents leave the city, or even Victoria, during the next two years.
‘Whether they relocate to a nearby Victorian regional location such as Bendigo, Wodonga, the Great Ocean Road region or whether they completely leave the state, thousands of Melburnians will take action to regain their freedom,’ he said.
‘Prolonged uncertainty for one’s income is unsustainable. Lockdown is no lifestyle.’
Digital Finance Analytics compiles telephone and focus group data every month from 4,700 respondents.
Every month, it creates heat maps showing suburbs suffering from the highest levels of mortgage stress with areas marked in red indicating 89 per cent or more borrowers can’t pay their bills.
Before the COVID-19 pandemic, Australia had the world’s second highest debt-to-income ratio of 186.5 per cent, largely as a result of high house prices.