Mortgagees in regional areas hit hard by rising national unemployment

Aussie homeowners in regional areas are falling behind on their mortgage repayments at a faster rate than metropolitan homeowners due to the end of the mining boom and rising national unemployment.

A report by S&P Global Ratings on mortgage arrears in the east coast found that homeowners in the Queensland areas of Cairns, Townsville, and Wide Bay were more likely to be 30 days behind on mortgage repayments.

The number of regional homeowners who’re behind on their mortgage repayments has increased 18% in the past year to July, compared to the 2% growth among the metropolitan mortgagees.

Separate research from S&P Global Ratings found that Broken Hill (New South Wales), Armstrong Beach (Queensland), Currency Creek (South Australia), and Butler (Western Australia) had the highest rate of loans overdue in the country.

The percentages of loans in arrears in these postcodes are 8.27% in Broken Hill, 7.42% in Armstrong Beach, 5.44% in Currency Creek, and 5.43% in Butler.

“Mortgage delinquencies in regional areas traditionally have outpaced metropolitan areas. This often has been the case because regional centres are more vulnerable to a downturn,” the report said.  

Erin Kitson, associate director at S&P Global Ratings, said mining and manufacturing regions, especially in Queensland and Victoria, were struggling because of huge job losses over the past two years. Particularly hard hit was Geelong, a key car-producing and manufacturing hub, where unemployment rose sharply in the past year.

“If you look at the areas where the arrears have been growing, it is primarily regions where industry or major employers have exited the area and that has led to an increase in job losses,” Kitson said. “So you have a situation where people become unemployed but they still have to pay their mortgages.”

Kitson noted that the non-metropolitan regions of Australia tend to have economies that are less diverse compared to metropolitan areas. Hence, if mortgagees lose their jobs in Wide Bay or Currency Creek, they’ll have less employment opportunities than mortgagees who lose their jobs in Sydney or Melbourne.