Mortgage figures just released show that many home owners are struggling to keep up with ever increasing interest rates and the ballooning price of petrol. The amount of people suffering mortgage stress in Australia has jumped significantly according to the latest report from Fitch ratings. The study (released 30 May 2008) audited 947,000 Australian Residential mortgages as of 31 March 2008 with a total value of $160,000,000,000.

Of the ten worst suburbs for mortgage arrears of 30+ days, nine are located in NSW with most of them being located in the Sydney western suburbs. These include:

1  Wetherill Park, NSW, 6.7%
2  Helensvale, QLD, 6.4%
3  St Marys, NSW, 6.3%
4  Kurrajong, NSW, 6.1%
5  Guildford, NSW, 6.0%
6  Punchbowl, NSW, 5.3%
7  Lake Illawarra, NSW, 5.2%
8  Greenacre, NSW, 5.2%
9  Rooty Hill, NSW, 5.1%
10 Fairfield, NSW, 5.0%

Those regions in the western suburbs of Sydney were found to have rates of mortgage arrears up to 3.5 times of their eastern suburbs and lower north shore counterparts. Wetherill Park arrears rates have increased to 6.7% compared to only 5.65% in September 2007. Fitch also reported that with the current economic outlook likely to worsen (increasing interest rates, slowing economy and soaring fuel prices) many families will increasingly find it difficult to meet their mortgage obligations. Mixed predictions are currently being forecasted about tomorrows RBA meeting on whether to raise interest rates.

With unsustainable increases in West Australian property prices over the past few years (especially in and around Perth) the market is finally starting to slow with the western state seeing the most deterioration in mortgage performance over the past six months. However, WA seems to be somewhat cushioned from the blow due to its rapidly expanding resource boom.

With Sydney property prices peaking at the end of 2003 the market is still to recover. Many properties have decreased in value by as much as 30% especially in the western suburbs leaving a massive mortgage belt black hole. Many highly stretched borrowers have been placed under enormous financial stress causing many to sell their property for prices well below what they paid for. This is due to the difficulty of sourcing affordable finance which has been caused by the sub-prime mortgage crisis in the United States.

The Fitch report believes that declining mortgage performance is mainly due to increasing interest rates which have reduced housing affordability to its lowest rate since the late 1980’s. This report is further supported by the latest ANZ housing snapshot which shows that on a national average, home purchasers are spending close to 40% of their housing income on home loan repayments up from approximately 22% in 1997.

With petrol prices tipped to go past more than $2 a litre in the coming months as well as the flow on affects of rising food prices many people will be faced with whether to sell their house or hold on and possibly lose out in the long run. Very uncertain times ahead for the Australian property market, what will you do?