Mortgages and household expenses are climbing fast with the pressure intensifying in some of Australia's most established suburbs.
In Sydney's lower north shore — think suburbs like Lane Cove, Northwood, Riverview, Longueville and Linley Point — severe mortgage stress rose 208% in 2026's first quarter, compared with the quarter before. Severe mortgage stress in Melbourne's southeastern neighborhoods, including Carnegie, Glen Huntly and Murrumbeena, surged 1024% in the first quarter, year-over-year, according to a new report, dubbed "OurTop10 Mortgage Stress Report for Q1 2026." The report, compiled by Digital Finance Analytics (DFA), examined mortgage stress levels across postcodes nationwide. DFA defines mortgage stress as households merely breaking even after mortgage and living expenses, while severe mortgage stress refers to households losing at least 5% of their income each month.
"What's causing it is inflation and also higher interest rates," Mansour Soltani, director at Sydney-based mortgage brokerage Soren Financial, told Australian Broker.
"People are taking on larger debts," he continued. "We're seeing that in our brokerage; people are taking large debts to enter these suburbs. And then when there's some sort of seismic shift, such as someone losing a job or they get retrenched, or there's a decline in income or whatever, everything falls apart."
Layer on ongoing global uncertainty, a persistent housing shortage, rising property prices and looming tax changes, and it becomes a perfect storm for mortgage stress
According to the report, in suburbs across Australia, 54 capital city postcodes had higher general mortgage stress, 16 saw rises in severe stress and 41 logged increased mortgage default risk.
Perth and Melbourne in particular showed increased levels of severe mortgage stress. In the first quarter, severe mortgage stress rose 175% in Perth's Fremantle neighborhood, while Melbourne's Eastern Suburbs Balwyn North and Greythorn Increased 126%. Year-over-year, severe mortgage stress in Melbourne's Inner Eastern suburbs Hawthorn and Glenferrie increased 234%, while Perth's East Fremantle neighborhood was up 197%.
"People are spending more than they're bringing in, in income," Soltani said. "For example, they may be using their credit cards to pay for things. And they're kicking the can down the road.
"The next report that comes out is going to be very interesting," he continued. "Because it's going to show that this problem is just getting bigger and bigger."
For brokers, Soltani said, this means they "need to start getting creative and start looking outside the major lenders. They need to start having a look at consolidating debts. If people have multiple credit cards, for example, they need to consolidate those debts if they need to move lenders.
"So that means you might need to take your car loan, your credit cards and rope them into your home loan and push the length of your loan back," Soltani said. "Let's say your loan is 22 years at the moment. We're finding that brokers need to push those loans back out to 30 years to be able to get them to pass, to be able to move to a lender with a lower rate, which then has a knock-on effect. Because if I'm taking your loan that's 22 years and pushing it back out to 30, I'm adding eight years of interest to your loan, and that's not a good thing."
