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The areas most at-risk in Sydney that were once associated with affluence include the Eastern Suburbs, North Shore and Northern Beaches.
According to Digital Finance Analytics (DFA), only one of 11 Dover Heights mortgage owners are at risk of defaulting.
“These suburbs that have more wealth, I call it affluent Stress,” says Martin North, principal of DFA. Martin North, principal at DFA, stated that it was a unique experience.
“People are currently in financial distress and many of them will struggle for the next few months.”
It’s the exact same situation in Bellevue Hill, Kirribilli Gordon, and Bellevue Hill. They are better prepared to weather financial storms in Sydney’s West, where they have more conservative mortgages.
While mortgage stress is high in the west it is also lower south-west. They are more at risk of default.
Many have refinanced to lower mortgages which has led to record-breaking refinance rates.
Low interest rates also create a buffer.
ABS Lending Indicators reported that July saw $17.22 Billion worth of mortgages being refinanced. This was 6 percent more than the previous month.
North stated that the suburbs of wealth have over-extended families.
It is a combination between large owner-occupier loan amounts and stress from investment property. This means that they are unable lease or to receive the rents they used, while their income is under significant pressure.
These cross-leverage problems are what create an awful situation in the east and north.
“They’re extremely leveraged and unfortunately it’s becoming unglued now,” Mr North stated.
These buyers paid top dollar for banks that were willing and able to lend large amounts.
The risk of defaulting is lower west, in suburbs such Doonside and Greenacre, Wetherill Park and Wetherill Park, than in Rooty Hill (1.49 % in Hoxton Park; 1.33 % Penrith).
North stated that he has been modeling for twenty-years and that it is the most difficult thing he’s ever seen.
He warned that things could get worse.
Official default figures are inaccurate as banks may encourage stressed homeowners to sell their homes before they foreclose to avoid bad publicity, additional costs, and negative publicity.
Akram Zaki, a Blacktown school teacher, is becoming more concerned about what’s going on around him.
Mr Zaki explained that there was anxiety.
Zel was his wife, and he was pregnant. Knowing they would soon have to reduce their household to one, he refinanced his mortgages to make $8000 each for the next three-years.
He also has an investment property – the type of owner-investor Mr North referred to.
True Savings, an internet broker, stated that refinancing while interest rates are at record lows is a great way build a financial buffer.
Pete Steel, founder, stated that most people don’t have to pay the loyalty tax. He said that most people rely on their banks for the best rates. This is often not the truth.
Katherine Temple, policy director at the Consumer Action Law Centre, stated, “Anyone in hardship should talk to their lender to determine what options are available before they go into default.”
Ms. Temple stated, “It is a really dire financial situation for a lot of people.”
“We are hearing from people who never needed help before.”
Ms Temple said that significant debt can have a devastating impact on relationships, families and mental health. The sooner people seek treatment, the better.
The National Debt Helpline offers free, independent financial counseling.
“There’s help. Do not try this by yourself.
TOP 10 SUBURBS RAISED FROM MORTGAGE DEAFAULT
|1. Dover Heights||8.86%|
|4. Bellevue Hill||8.12%|
|5. Darling Point||7.93%|
|8. Duffys Forest||6.26%|
|10. Rose Bay||5.59%|
Credit: Digital Finance Analytics