Mortgage relief spreads nationwide but Melbourne lags behind

Despite recent RBA rate relief, mortgage holders in parts of Melbourne are still struggling to meet repayments, according to analysis from Moody's. 

The city's high rate of mortgage arrears is attributed to elevated unemployment, weak house price growth, and new investment laws.

RBA rate cuts eased pressure on mortgage holders over the year to May, and further relief is expected through 2026, the credit ratings agency notes.

However, five of the 10 regions with the highest delinquency rates are in Victoria, underscoring the state's ongoing struggles.

A home loan borrower is considered delinquent if they're behind on their mortgage repayments by 30 days or more.

Melbourne mortgage holders continue to struggle

Moody's expects parts of the Victorian capital will remain a "weak spot" in 2026.

Melbourne's west, north west, and south east regions appear to be under the most mortgage pressure.

Arrears in the outer-ring regions improved slightly year-on-year but remain high, averaging between approximately 2.1% and 2.5%, compared to the national average of 1.45%.

They also record the highest unemployment rates in the state.

Unemployment was measured at between 5.1% and 5.7% in each of the Melbourne regions in August, Victorian Government figures show.

For comparison, the state's unemployment rate was 4.7% in August while Australia's was 4.2%.

10 worst performing regions for mortgage delinquencies

Region	State/Territory	30+ days delinquency rate - May-25	Annual change
Far West and Orana	NSW	2.92%	-0.17%
Darwin	NT	2.68%	-1.01%
Shepparton	Victoria	2.65%	0.69%
Warrnambool and South West	Victoria	2.60%	0.93%
Hume	Victoria	2.51%	-0.04%
Melbourne - West	Victoria	2.45%	-0.59%
Southern Highlands and Shoalhaven	NSW	2.41%	-0.22%
Melbourne - North West	Victoria	2.34%	-1.11%
Hobart	Tasmania	2.24%	-0.44%
Western Australia - Outback	WA	2.13%	-0.69%

_{Source: Moody's Ratings}

While unemployment is a key factor, it only partly explains Victoria's elevated arrears rate.

Melbourne's sluggish property values contributing to mortgage arrears

"We expect parts of Melbourne where unemployment is relatively high and where the property market is soft will remain a weak spot for mortgage delinquencies over the next year," Moody's report reads.

While weak house price growth doesn't directly contribute to mortgage delinquencies, it might leave struggling borrowers fewer avenues of reprieve.

Melbourne's median dwelling value peaked in March 2022, Cotality data shows.

As of the end of September, it sits at $805,880 - 3% lower than its record high.

Meanwhile, house values in Sydney, Brisbane, Adelaide, and Perth have rocketed upwards in recent years and currently sit at record highs.

See also: Median house prices around Australia: October 2025

The disparity between property value growth across the cities is partially due to migration trends.

While many parts of the country have seen an influx of residents in recent years, Moody's notes Victoria has realised an inter-state migration outflow.

Additionally, international migration into the city is largely made up of students who typically don't purchase property.

"This creates less demand for homes and contributes to the stagnation of home prices," the report reads.

Moody's also pointed to Victoria's recent tightening of property investment rules, which may be dampening investor demand and weighing on prices.

New laws for property investors will take effect in November, banning owners and property managers from accepting offers of higher rents than those advertised.

The changes will also see a ban on no-fault evictions and the minimum notice period for a rental increase or notice to vacate extended to 90 days.

Mortgage stress around Australia hits near-three-year low

Looking beyond Melbourne, Australia's mortgage delinquency rate reached its lowest point in at least five years in mid-2025, falling 0.55% year-on-year to sit at 1.45% in May.

The ACT boasts the lowest level of delinquencies, with an average rate of 1.1%, while Queensland and South Australia boast respective rates of approximately 1.2% and 1.3%.

The south of Brisbane holds the title of the lowest average delinquency rate (0.71%), followed by the west of Adelaide (0.72%), inner Perth (0.73%), and North Sydney and Hornsby (0.78%).

The findings come amid news the number of mortgage holders at risk of mortgage stress has fallen to its lowest level since February 2023.

"The latest Roy Morgan data shows a significant reduction in mortgage stress following the Reserve Bank's interest rate cut in mid-August," Roy Morgan CEO Michele Levine said.

"If the RBA cuts interest rates in early November by a further 0.25% to 3.35%, the share of mortgage holders 'at risk' will drop to 24.4% - the first time this share has dropped below one-in-four mortgage holders since January 2023."

Beyond RBA rate cuts, a continuously low unemployment rate has helped buoy homeowners' finances.

More than one million new jobs have been added to the economy since the RBA began its hiking cycle in May 2022, likely moderating mortgage stress among Australians.

However, unemployment rising to its highest in nearly four years in September could stand as a reminder that the benefits of lower rates and previously strong job growth aren't being felt evenly.

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_{Image by Simona Sergi on Unsplash}