Mortgage stress in Vaucluse, Gold Coast

The retirement mecca that is the Gold Coast and Sydney's blue-chip suburb of Vaucluse have joined struggling south-western Sydney as the areas suffering most from mortgage stress and loan defaults.

Rising interest rates in late 2007 and 2008 are blamed for increased mortgage delinquency rates.

But global credit rating agency Fitch Ratings, in its analysis, said the situation was unlikely to improve next year as unemployment rises with the economy teetering on the edge of recession, even though home loan rates are now falling.

Fitch Ratings expects unemployment to rise to 5.4 per cent in 2009 as economic growth slows to a meagre 0.3 per cent.

"We expect to run close to the wind ... but not go into recession," Fitch managing director of structured finance Ben McCarthy said in a teleconference.

He said mortgage delinquency rates would increase further in the face of competing factors.

On one side, the cost of living is improving with petrol prices falling, combined with falling interest rates and tax cuts.

"On the downside we see the Christmas period, which traditionally sees a seasonal up-tick in delinquency performance, and we also have a rapidly slowing economy and potential for a rise in unemployment," he said.

The report by Fitch released on Wednesday found the mortgage delinquency rate for one missed repayment or more in Australia increased to 2.13 per cent from 1.88 per cent in the six months to September.

The report does not take into account the October and November rate cuts when the Reserve Bank slashed the cash rate by 175 basis points.

The report is based on more than 840,000 securitised residential mortgages - valued at $140 billion - which make up 15 per cent of the entire home loan market.

South-western and western Sydney remain the nation's mortgage stress hotspots, but there have been significant changes in the suburbs of Perth, south-east Queensland and NSW regional areas, such as Wollongong, Newcastle and the Central Coast.

Helensvale, on the Gold Coast, is the most mortgage-stressed suburb in Australia, but one of the nation's most affluent addresses - Vaucluse - is rated seventh worst by loan value.

The top 10 suburbs and towns listed as suffering the most mortgage stress are: Helensvale (Qld), Nelson Bay (NSW), Raymond Terrace (NSW), Katoomba (NSW), Greenacre (NSW), Guildford (NSW), Vaucluse (NSW), Fairfield (NSW), Cessnock (NSW) and St Marys (NSW).

Still, mortgage serviceability is improving because of recent interest rate cuts, and with more reductions anticipated, an average wage earner with an average sized home loan is better off regardless of when the loan was taken out in the past five years.

"That is a positive going forward, but the big unknown is unemployment," Mr McCarthy said.

"As long as people keep their job, serviceability has actually improved and mortgage performance should remain good."