As the RBA turns the screws on Australia, hoping to suppress purchasing activity and thereby reduce inflation, mortgage repayments are rising. Borrowers are the treadle on which the foot of monetary policy bounces out its rhythm, up and down and back again.
Are households with mortgages suffering? Two-thirds are at least a little bit ahead on their repayments. Others are having hard conversations about what to do as mortgage payments rise: whether to work more, perhaps labouring over the weekend instead of spending time with family — or cutting back on expensive groceries.
Different families face different choices. Mortgage-holder households matter, not just because there are so many of them, but also because so many of them have kids. As the machine of monetary policy makes households tighten their belts, kids get squeezed. As the next chart shows, $3 billion was paid each month by mortgagee households with kids under 15 at the time of the census in 2021. A lot more than $3 billion will be flowing from households to banks now official cash rates have risen from 0.1% to 1.35%.
The chart above illustrates that some people have significant mortgages. There’s a chunk of people paying off five grand a month or more and far more paying more than $2500 a month.
Who are these people? I mapped mortgage payments by suburb for Australia’s cities and the answer seems to be that big mortgages don’t map onto the wealthiest suburbs. But they are found in the suburbs nearby. The maps below use a colour code to show which parts of the city have the highest mortgages. Labels are applied to suburbs from the top and bottom of the repayment spectrum.
The highest mortgage repayments in the country are found in the ACT and Sydney, the maps reveal, and the lowest are in northern Adelaide.
But of course a high mortgage is no big deal if you have a high income. Where are mortgages highest as a percentage of local incomes? The following maps show that it’s not always the same areas where mortgage repayments are highest.
The Sydney map is instructive — in Cabramatta, household mortgage repayments are towards the top of the scale compared to local personal incomes, while in Balmain repayments are low compared to local personal incomes.
(Note that this is an indirect measure of mortgage stress. Households with mortgages in an area contain a subset of those whose incomes are measured and may have different characteristics — younger than average in areas that tend older; older than average in areas that tend younger; richer than average in areas that are diverse and have a lot of public housing; more likely to have multiple incomes in the household, etc. The percentages do not tell you how much of their income a family is spending on their mortgage. Consider it as a probability indicator for mortgage stress for people in that area.)
Still, the pattern is consistent in Melbourne as well: well-off Brighton has one of the lowest shares of mortgage repayments compared to local income, while Broadmeadows (battler territory) is towards the other end of the scale.