Cost of living Australia: What life’s like in Melbourne’s most mortgaged suburb

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Outside Aldi in Clyde North, nurse Sunitha Binoy gestures to her shopping trolley when asked how rising interest rates and the rising cost of living have encroached on her family’s life.

“Before, we could buy so many things,” she said. “Like today, even though we paid $160 … before we could get one trolley full of household items, but now look at the trolley. It’s half full, only.”

Sunitha Binoy and husband Binoy Cherian Kuriakose say their shopping trolley used to be a lot fuller. Credit: Jason South

In Melbourne’s most-mortgaged suburb, the confluent housing and cost of living crises are clearly visible after 12 interest rate rises in little more than a year.

One of the largest costs Binoy’s family of four faces is their mortgage. “That’s gone high, so we get less to spend on the household,” she said. “[Our] salary didn’t go up.”

Almost three quarters of homes (72 per cent) in the southern half of Clyde North were mortgaged, which made it the most mortgaged region in Greater Melbourne. The median house price in Clyde North is now $725,000 – up 25 per cent in the five years to June, on Domain data.

It was followed by Eynesbury and Exford – suburbs west of Tarneit – at 69 per cent, and nearby Fraser Rise and Plumpton at 67 per cent. All the most mortgaged areas were at the city’s edge in growth corridors.

The Reserve Bank began hiking interest rates in May last year, and lifted them at the fastest rate since the mid-1990s. The cash rate soared from a record low of 0.1 per cent to 4.1 per cent, sharply raising the price of servicing a mortgage, and a pause this week is scant relief.

Rates of mortgage delinquencies and distressed sales were still low, but rising. Economists say this could be because mortgagors were choosing to sell properties before they can become a mortgagee-in-possession sale, and the number of homes for sale has started to tick up.

Binoy was prioritising paying the mortgage and for her children’s education, and had cut back on groceries and discretionary purchases like eating out.

IT worker Amila Bandara has owned his first home for about four years. He was lucky enough to refinance during the rate hikes to get a better deal, but even still he said his family were starting to struggle. One more increase could be the difference.

Amila Bandara says he prioritises spending on his children, and his partner has found a better paying job. Credit: Jason South

“It will be a big deal,” he said. “We are, like, almost at the edge of the finance thing but yeah, it will be hard for us.”

Like Binoy, Bandara was focusing on his children.

“We have cut down the groceries, maybe 50 per cent,” he said. “We’re only thinking about the children at the moment, you know?

“Dinners out and all the extra costs, we’ve cut down.”

His partner also found another, better paying job to make ends meet. Bandara said some of his friends were taking second jobs to pay their own mortgages.

“We got our house because we were renting and we were thinking like: ‘OK we can just buy a house, so we can spend for our own house instead of spending for someone else’s house’,” he said. “But now our interest [payment] has doubled. It is ridiculous.”

Government worker Stuart Bluck was on a fixed-rate loan, but was due to roll onto a variable rate some time in the next 12 months. The cash rate could have fallen by that point, and he said it was too soon to tell what effect it would have.

“I’m a bit nervous, yeah,” Bluck said. “Once the fixed rate finishes … it’ll be a big shock.”

Stuart Bluck is concerned about rolling off a fixed rate mortgage.Credit: Jason South

His rate was about 2 per cent, and Bluck was expecting to pay 6 per cent or more next year.

Fletchers Cranbourne managing director Ekansh Kohli said these were common stories across Melbourne’s most mortgaged areas. He said he had advised some struggling homeowners to consider selling before their bank forced them to.

“It hasn’t gotten that ugly yet, because a lot of people are still on their fixed rates which should last until the end of the year, then it will start hurting more,” Kohli said. “If you are starting to feel that pain it might be better to sell up and move into something smaller.

“[If you wait until the bank takes possession] you’re going to get less compared to the market value because the contract says the bank is selling it, so the buyer says ‘I’m going to get a bargain’.”

It was more common for investors than owner-occupiers to be selling their properties at the moment, he said.

“I’m noticing more landlords getting rid of the investments because costs are coming up,” Kohli said. “A lot of them don’t want to be a residential landlord any more.”

MoneyQuest Narre Warren finance specialist Trish Wijesekara agreed it was mostly landlords choosing to offload properties and that homeowners were pulling out the stops to hang onto the family home.

“I’ve realised some people these days would rather keep their own property and sell their investment to get rid of the mortgage,” she said. “Repayments have increased, not by a couple of hundred dollars. For some people, it’s doubled.

“Saving at least $100 is a lot to them. There isn’t a lot we can do as brokers but what I try to do is get them a better rate. You just have to wait until things stabilise.”

Wijesekara said wages hadn’t kept up with inflation, which was worsening the problem in suburban communities that have lower income levels than in the inner city.

“Income hasn’t increased, so most of them are struggling,” she said. “The loans people were servicing six months ago, they can’t do now.”