Mona Vale Blog

Rising Mortgage Arrears: What Homeowners Need to Know on Sydney's Northern Beaches

Understanding the Increase in Mortgage Arrears

Mortgage arrears in Australia have been on the rise, moving from record lows of just 1.0% in Q3 2022 to 1.6% in the March quarter of 2024. This increase is most significant in non-performing loans, now at 0.93%. For homeowners in the Northern Beaches of Sydney, understanding these trends is crucial as they navigate their financial futures.

Key Factors Driving Mortgage Arrears

The sharp increase in mortgage arrears is largely driven by the rising cost of debt. The average variable interest rate on home loans has surged from 2.86% in April 2022 to 6.39% in March 2024. For a typical mortgage of $750k, this means an additional $1,600 in monthly repayments. Additional pressures such as cost of living increases, higher taxes, and dwindling household savings further complicate the financial landscape.

Impact on the Northern Beaches Real Estate Market

Despite these challenges, most borrowers have managed to stay on top of their repayments by drawing on savings, working more hours, or reducing contributions to offset accounts. The Northern Beaches, with its robust property market, offers a buffer against the worst effects of rising arrears. Properties here continue to appreciate in value, reducing the risk of negative equity.

Maintaining Strong Underwriting Standards

Australian lenders, guided by APRA (Australian Prudential Regulation Authority), have maintained strict underwriting standards. Borrower serviceability is assessed at rates 3.0 percentage points higher than the loan product rate, ensuring a cushion against financial shocks. Interest-only loans and high loan-to-income ratio lending remain under tight scrutiny, further safeguarding the market.

Future Outlook for Homeowners

While mortgage arrears are expected to rise further, a significant blowout is unlikely unless the labour market weakens substantially. For Northern Beaches homeowners, the risk of falling into negative equity remains lower than other regions, thanks to continuous property value appreciation. Should financial difficulties arise or remain highly uncertain, the option to sell and clear debts remains viable for most.

Staying Prepared

As economic conditions evolve, homeowners on the Northern Beaches need to stay informed and proactive. Regularly reviewing financial situations, seeking advice from real estate experts, and exploring options like refinancing can help manage rising mortgage costs effectively. We are here to keep you informed with the latest movements in the market and industry...

For more detailed insights and updates on the property market, please stay tuned to our blog and consult with our experienced team at Raine & Horne Mona Vale. If you would like to be added to our email database to receive 

Data and statistics derived from CoreLogic's News & Research: https://www.corelogic.com.au/news-research/news/2024/mortgage-arrears-are-rising-from-record-lows,-and-likely-to-rise-further