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Cutting back on luxury items, holidays and trips to the gym have been necessary for Nick Trezise's family as interest rate rises continue to heap pressure on household budgets.
Key points:
- Forrestfield had the third-worst 30 day arrears rate in Australia
- The suburb reflects wider trends in Australia's housing market
- Mortgage stress was the main reason behind visits to a financial counsellor
The family of five live in the outer Perth suburb of Forrestfield, which was ranked the third worst suburb for mortgage arrears in Australia in a recent S&P Global Ratings report — and an expert says it is indicative of broader trends in the housing market.
Katoomba in the Blue Mountains region of NSW ranked first and Bonnyrigg, also in NSW, ranked second.
Mr Trezise said while it would take both he and his wife losing their jobs to fall behind with their repayments, they have still had to make changes to provide for their three primary-school-aged children.
He was one of several Forrestfield residents who spoke to the ABC about how 12 interest rate rises in the past 13 months were affecting them.
"The increase is a lot for a family of five, we have just remortgaged with another lender. It's affecting everyone and it's affecting us as well.
"We're definitely having cutbacks. We've stopped going to the gym, me and my wife, obviously cutting back on holidays, less luxury items as well."
'We don't go out anymore'
Mining worker Katherine, who did not want her surname published, said her mortgage repayments had gone up by roughly $2,000 per month.
"We have to stick to a strict budget and we essentially don't go out anymore," she said.
"It's continually getting harder and harder. There's no relief in sight.
"I'm worried about what's going to happen for my kids. I can teach them to save, but will they ever be able to afford their own home the way the current [market] is?"
Katherine said she and her husband had to start taking on odd jobs to make ends meet, like ironing, mowing lawns and washing cars.
Forrestfield was the only Western Australia postcode ranked in the top 10 suburbs for mortgage arrears, according to the S&P Global Ratings report released earlier this month.
During the March quarter, 4.86 per cent of loans in Forrestfield were in arrears by more than 30 days compared to 1.36 per cent for inner Perth, while many other capital cities listed rates between 1 and 2 per cent.
That compared to 5.62 per cent in Katoomba and 4.91 per cent in Bonnyrigg, which were the first and second worst in the country for mortgage arrears.
The average family in Forrestfield earns $1,982 a week, which is $277 lower than the $2,259 figure for greater Perth, according to the 2021 ABS Census.
Trends reflected across nation
Erin Kitson from S&P Global Ratings said arrears across the board were increasing, with newer home buyers and outer suburbs most badly affected.
"What you tend to see more and more with some of these postcodes that do crop up is postcodes that perhaps might be on the outer fringes of capital cities," she said.
"You might tend to see more first home owners who might be feeling more mortgage stress in this environment, particularly if they bought at the peak of the property boom [during COVID], and are more highly leveraged, given they don't have the same savings buffers going into buying their first home."
Australian Bureau of Statistics data shows new loan commitments spiked during COVID, before falling in 2023.
Ms Kitson said while the top 10 suburbs can change from quarter to quarter, they reflect wider trends.
She said the unemployment rate had a large bearing, particularly on more advanced arrears rates, and there were typically less WA suburbs making up those rates compared to previous years.
"One of the things that stands out with WA compared to states like NSW and Victoria is whilst arrears have been increasing certainly over the last 12 months, from their very low pandemic lows, WA arrears are still a reasonable amount lower than some of the peaks due to those legacy loans from the mining boom," she said.
Mortgages behind financial stress
Siobhan Meerman is a senior financial counsellor at not-for-profit organisation Midlas, and works with hundreds of people from Perth's outer suburbs, including those from Ellenbrook, Midland and Forrestfield.
"The number one reason people come to us for help right now is mortgage distress," she said.
"The main reason they're having difficulty is either a loss of employment or underemployment.
"Most people come to us about 12 to 24 months after the problem starts happening.
"We have been seeing particularly this year the increase of people citing the interest rate rises as a distress factor.
"We are also starting to see people who just got their mortgage in the last couple of years, not being able to pay now that their rate has jumped from 2 per cent to 7 per cent."
'Everybody's talking about it'
City of Kalamunda Mayor Margaret Thomas said the arrears rate was "disturbing" and Forrestfield, which is within the Kalamunda local government area, had a mix of lower socio-economic areas, newer developments and people who had paid off their mortgages.
She remembered a time when interest rates shot up to 9 per cent — more than double the current 4.1 per cent rate — but said lots of younger borrowers did not have that perspective, with the continuous interest rate rises hurting them.
"Everybody's talking about it. It's something like $1,000 extra a month for lots of people, including my own children," she said.
"That's a lot of money for people, particularly people who don't have a lot in the first place. It pushes them over the edge.
"There are some new areas in Forrestfield and there are some areas where you've got single parents and young families and they are just struggling."
Figures paint gloomy picture
Mortgage distress was not unique to Forrestfield, with figures tabled in parliament in May showing the number of West Australians falling behind on government-backed loans had more than doubled in less than a year.
The number of Keystart loans that were more than 30 days in arrears jumped by 128 per cent, from 392 loans in June 2022 to 892 loans in April 2023.
The state government last week lowered the interest rate on Keystart loans from 8.26 per cent to 7.35 per cent to ease pressure on vulnerable households.
Following a review, the Keystart interest rate would now be directly linked to the cash rate, rather than the variable rate at the big four banks — representing roughly a $300 reduction for the lender's average loan of $390,000.
But there are likely more interest rate rises ahead, amid historically-high inflation and tight labour markets.
The S&P Global Ratings report's authors also expected an increase in the later-arrears category of 90 days over the next six months.