Affluent Sydney suburbs on the brink of mortgage defaults

© Nine Modelling by Digital Finance Analytics (DFA) exclusively for 9News shows one in 11 mortgage holders in Dover Heights is at risk of defaulting.

They’re the unexpected suburbs on the brink of mortgage hell.

Once associated with affluence, Sydney’s eastern suburbs, North Shore and Northern Beaches are at greatest risk of mortgage defaults.

Modelling by Digital Finance Analytics (DFA) exclusively for 9News shows one in 11 mortgage holders in Dover Heights is at risk of defaulting.

“These more affluent suburbs, I call it affluent stress, are not used to it. It’s a new experience for them,” DFA principal Martin North told 9News.

“People are in financial stress at the moment and many of those people are going to struggle over the next few months.”

It’s a similar default scenario in Kirribilli, Gordon and Bellevue Hill while in Sydney’s west, where they have far more conservative mortgages, they’re actually better placed to weather the financial storm.

Although mortgage stress is highest in the west and south-west, their risk of default is much lower.

Many have refinanced to cheaper mortgages, contributing to record high refinancing levels.

Low interest rates have also helped provide a buffer.

© Nine Although mortgage stress is highest in the west and south-west, their risk of default is much lower.

A total of $17.22 billion in mortgages were refinanced in July, according to the ABS Lending Indicators, an increase of $978 million or 6 per cent from the previous month, in seasonally-adjusted terms.

Mr North said families in the affluent suburbs are over-extended.

It’s a combination of very large owner-occupier mortgages with stress coming from investment properties where they can’t lease them or get the rents they used to while incomes are under substantial pressure.

It’s these cross-leverage problems creating a dire situation in the east and north.

“They’re very highly leveraged and unfortunately it’s becoming unglued now,” Mr North said.

People who’ve bought in those areas have paid top dollar with banks willing to lend big.

In the west, the risk of default in suburbs like Doonside, Greenacre and Wetherill Park is just under 2 per cent, while in Rooty Hill it’s 1.49 per cent, 1.45 per cent in Hoxton Park and 1.33 per cent in Penrith.

Mr North said he’s done this modelling for 20 years and when everything is taken into account, “it is the worst I’ve seen it”.

He warned things could get a lot worse.

Official default figures don’t tell the full story as banks will often encourage stressed households to sell before they foreclose to avoid the bad publicity and extra costs.

Blacktown school teacher Akram Zaki is seeing what’s happening around him and he’s concerned.

“There’s some anxiety going on, not just personally but I can feel it when I talk to other people, when I talk to my family and friends,” Mr Zaki said.

His wife, Zel, is pregnant so knowing they would soon go down to one salary, he refinanced his mortgages to save himself $8000 a year for the next three years.

He also has an investment property – the type of owner-investor Mr North referred to.

Online broker True Savings said refinancing while we have record low interest rates was a simple way to build a financial buffer.

“Most people still aren’t, they’re still paying the loyalty tax and relying on their banks to give them the best rates and it usually doesn’t happen,” founder Pete Steel said.

Katherine Temple, policy director at the Consumer Action Law Centre, said anyone experiencing hardship should talk to their lender to see what avenues are available before they reach that default stage.

© Nine Once associated with affluence, Sydney’s eastern suburbs, North Shore, and Northern Beaches are at greatest risk of mortgage defaults.

“It is a really dire financial situation for a lot of people,” Ms Temple said.

“We’re hearing from people for the first time who’ve never had to seek help before.”

Significant debt takes a huge toll on families, relationships and mental health, Ms Temple said, and people should seek help “the earlier, the better”

The National Debt Helpline is a free, independent service that can provide financial counselling.

“There is help out there. Don’t do this on your own.”

TOP 10 SUBURBS AT RISK OF MORTGAGE DEFAULT

1. Dover Heights 8.86%
2. Kirribilli 8.65%
3. Gordon 8.64%
4. Bellevue Hill 8.12%
5. Darling Point 7.93%
6. Bayview 6.69%
7. Woollahra 6.50%
8. Duffys Forest 6.26%
9. Freshwater 6%
10. Rose Bay 5.59%

Credit: Digital Finance Analytics

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