Every time interest rates rise, Del has to decide what to cut from the family budget

Single mom Del Hayes thinks about what she can save on her family’s budget every time mortgage rates rise on her south-west Sydney home.

She trades in branded groceries, searches for better Internet packages, and hopes the sun will shine so she can steam the dryer and hang her clothes on the line at her home in Oakdale.

“I do not want [mortgage rates] to go up, because it would just take me more time to pay it off,” she said.

“If I want to take the kids on vacation, it takes me forever to budget for that. I just don’t have anything for single use.”

Households in western Sydney are facing the same fiscal crisis after the Reserve Bank raised its spot interest rate from 0.85 to 1.35 percent on Tuesday. third increase in as many months.

Some banks have have already passed on the increase to customers†

The local economy will feel the squeeze

According to recently released Census data, the number of mortgages whose repayments exceeded $4,000 a month has more than doubled in Western Sydney over the past decade from 15,632 to 32,287.

An analysis by the nonprofit think tank Western Sydney Leadership Dialogue (WSLD) also found that 49 percent of households in the region have incomes less than $2,000 a week.

“Mortgage stress will be a factor for many families in the region in the coming years,” said WSLD Director Adam Leto.

The Census revealed that the number of renters spending more than $650 a week in western Sydney has also surged to 19,324 in 2021 — a 97 percent increase from 9,829 five years earlier.

The analysis included mortgage and rent data in 13 council areas, including Blacktown, Blue Mountains, Camden, Campbelltown, Canterbury-Bankstown, Cumberland, Fairfield, Hawkesbury, Liverpool, Parramatta, Penrith, The Hills Shire and Wollondilly.

Mr Leto said some people would have to cut their spending due to rising housing costs, which would hurt the local economy.

“That’s bad news for businesses, especially in Western Sydney, which is so reliant on small businesses as an important part of the economy,” he said.

‘Tipping point is very close’

The rising cost of mortgages comes amid rising inflation and living costs.

Martin North, a banking analyst and data scientist at Digital Finance Analytics, said mortgage stress in Western Sydney had steadily increased.

“Eventually there is a tipping point and that tipping point is very close now,” he said.

The problem is particularly pronounced in the southwestern areas of Liverpool and Campbelltown.

Mr North said cheap debt and government stimulus programs have helped many people sign up for highly leveraged mortgages, but now they are vulnerable to “even small rate hikes”.

He said borrowers would assess their options while hesitating between holding onto their property or selling it. Others may face the prospect of not being able to make their payments.

But Mr North said the “real epicenter” of the current home affordability crisis is facing renters.

“Some real estate investors are now taking the opportunity to raise rents again as they try to cover the cost of their investment properties,” he said.