Western Sydney home owners bear brunt of interest rate hikes, as mortgage repayments exceed incomes

Single mother Del Hayes thinks about what cuts she can make from her family’s budget each time the mortgage rates rise on her south-west Sydney home.

She swaps out brand-name groceries, looks for better internet packages, and hopes the sun’s out so she can snub the dryer and hang her clothes on the line at her place in Oakdale.

“I don’t want [mortgage rates] to go up because it would just take me longer to pay it off,” she said.

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

Households across Western Sydney are facing the same budgeting crunch after the Reserve Bank on Tuesday lifted the cash rate from 0.85 to 1.35 per cent – the third rise in as many months.

Some banks have already passed the increase on to customers.

Repayments exceeding incomes in Western Sydney

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

An analysis by not-for-profit think-tank Western Sydney Leadership Dialogue (WSLD) also found 49 per cent of households in the region have an income lower than $2,000 a week.

“Mortgage stress will be a factor for many families in the region over the next couple of years,” WSLD executive director Adam Leto said.

The Census revealed the number of renters spending more than $650 a week in Western Sydney also rose sharply to 19,324 in 2021 – up 97 per cent from 9,829 five years earlier.

The analysis included mortgage and rental data across 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 need to cut their spending due to rising housing costs, which would hurt the local economy.

“That spells bad news for businesses, especially in Western Sydney, which is so reliant on small businesses as a key part of the economy,” he said.

‘Tipping point is very close’

The rising cost of mortgages comes amid rising inflation and cost-of-living expenses.

Martin North, a banking analyst and data scientist at Digital Finance Analytics, said mortgage stress had been steadily intensifying 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-western areas of Liverpool and Campbelltown.

Mr North said cheap debt and government stimulus programs have helped a lot of people sign up for highly leveraged mortgages but now they find themselves vulnerable to “even small rate increases”.

He said borrowers would be assessing their options, as they toss up between holding onto their property or selling them. Others might face the prospect of defaulting on their payments.

But Mr North said the “real epicentre” of the current housing affordability crisis is being faced by renters.

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