Suburbs where households can’t afford to pay their mortgages and can’t afford not to pay their mortgages

Erin Kitson, head of S&P Global Ratings, said before the pandemic, postcodes under pressure were mainly in Western Australia, where the housing market had been weak.

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“We’re seeing more of that in the outer postcodes of Sydney and Melbourne, which will reflect higher levels of borrowing in those areas because prices are higher,” she said.

“In those areas you’re more likely to see first-home buyers … these are people who are early in their careers and may not have the same level of savings as first-home buyers.”

Separate data from Domain shows rents in all of the suburbs included in the data have increased over the past year.

In Blacktown, house rents rose 18 per cent in the year to June, while unit rents increased 20.9 per cent. In Casula, house rents rose 14 per cent and in Camden, house rents rose 10.9 per cent.

In Victoria, house rents in Craigieburn were 16.3 per cent higher than a year ago, while rents also rose in Doreen (14 per cent) and Burnside (13.3 per cent).

Rising costs will reduce options for those struggling to pay their mortgages.

“It’s very difficult to rent a place, isn’t it? It’s difficult to find a rental when the vacancy rate is low,” Kitson said.

“For owner-occupiers, the first thing to do is to apply for a relief loan from the lender, because not only do they have to maintain their mortgages, but they also have low vacancy rates and high rents. This is a very urgent issue.”

Canstar data insights director Sally Tindall said local rent increases were posing a challenge for homeowners, who were struggling and considering selling their homes and renting them out elsewhere.

“When people feel caught between a rock and a hard place, it really limits their options,” she said.

“In areas where rental markets are becoming increasingly tight, this may mean it is a more difficult option for them.”

She said distressed borrowers should call their banks and ask for a rate cut. If that wasn’t enough, they should ask their banks about repayment options and call the National Debt Helpline for free advice from a financial adviser.

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Chris Martin, a senior research fellow at the University of New South Wales’ City Futures Research Centre, called for a national housing plan that took into account the systemic risks posed by rising interest rates.

One option could be a shared-ownership scheme, where the government takes ownership of the homes of the riskiest borrowers, alleviating some of the interest costs, he said.

“That’s a problem we haven’t had for a long time, that service capacity pressure problem. We’ve largely avoided that problem in Australia over the last few decades by removing the eligibility for low and middle income people to buy homes,” he said.

“But now it’s becoming a problem again because interest rates have risen much more than people expected.”