Blacktown’s 76% annual surge spotlights what five rate increases are doing to families in Australia’s most expensive city
Australia’s mortgage default risk has reached a series high, with new research estimating 24,546 households are now at risk of defaulting on their home loan – a 24% jump in 12 months. But the quarterly pace tells a more complex story, and for mortgage brokers, the real signal is not in the headline number. It is in what is coming next.
The OurTop10 Default Loan Report Q3 2026, compiled by Digital Finance Analytics (DFA) from a rolling survey of approximately 4,500 households per month, found that default risk rose just 3% in Q3 2026, a sharp slowdown from the 18% surge recorded in Q2. But that moderation should not be mistaken for relief.
As Mansour Soltani, Head of Research at OurTop10, said: “A slower quarter is not a better quarter.”
Western Sydney bears the sharpest load
The postcode telling the clearest story is Blacktown’s, which recorded the country’s largest annual increase in default risk – up 76%, from 196 to 345 at-risk households, including a 27% jump in Q3 alone.
Liverpool, also in Sydney’s west, rose 74% annually. Goonellabah in the Northern Rivers was up 58%. New South Wales placed three postcodes in the nation’s five biggest annual increases.
Soltani identified the structural trap these communities face: “Sydney is the most expensive city in the country, and Blacktown and Liverpool are where families end up when they want a backyard they can afford. But affordable in Sydney still means a massive mortgage. Add tolls on the M4 and M7, petrol, childcare and multiple rate hikes, and there’s nothing left at the end of the month.”
He also flagged a deteriorating safety valve: “And with Sydney prices now falling, the safety net is fraying. Earlier this year, a family in trouble could sell and walk away with something. Today, that’s a lot less certain.” For brokers, this is the critical shift – distressed clients can no longer rely on a property sale to exit cleanly. The options have narrowed.
NSW overall was the only state to record a quarterly fall in default risk, down 1.2%, but Soltani dismissed that as a mirage: the annual figure of 25.3% higher tells the real direction. Gosford holds the state’s largest count, with 592 at-risk households.
Default risk by state – Q3 2026
Modelled households at risk of default over the next 12 months, with quarterly and annual change
| State/territory | At-risk households | Qtr change | Annual change | Biggest quarterly mover |
|---|---|---|---|---|
| Victoria |
6,026
|
+2.6% | +25.4% | Narre Warren +23% |
| Western Australia |
5,895
|
+7.3% | +26.4% | Canning Vale +31% |
| Queensland |
5,139
|
+0.6% | +18.9% | Manunda (Cairns) +25% |
| New South Wales |
3,782
|
-1.2% | +25.3% | Blacktown +27% |
| South Australia |
1,874
|
+13.6% | +31.0% | Encounter Bay +78% |
| ACT |
1,257
|
+3.1% | +21.4% | Weston +29% |
Source: OurTop10 Default Loan Report Q3 2026, powered by Digital Finance Analytics. Figures are modelled estimates of households at risk of default over the next 12 months.
A lagging indicator
The DFA methodology carries a critical warning embedded in its design: default is a lagging indicator, typically following three to five years of sustained cash-flow stress. The current map of default risk reflects decisions made and pressures built in 2021-23.
Soltani noted that banks are already reporting a rise in hardship arrangement requests in 2026. For brokers operating in flagged postcodes, this translates directly into more difficult client conversations, refinancing constrained by serviceability buffers, loan restructures, and hardship referrals. The pipeline is building.
There is also a lender behaviour dimension to monitor. As postcode-level default data becomes more visible and widely cited, credit appetite in high-risk areas may tighten. Brokers in western Sydney, outer Melbourne, and regional Queensland should anticipate more scrutiny on valuations and serviceability assessments from lenders already watching these corridors.
The 2028 watchlist
Perhaps the most consequential finding for the industry’s medium-term outlook is what is happening in suburbs that do not yet appear in the default rankings.
Severely stressed households in Drummoyne surged 610% in Q3 2026 – from 224 to 1,591 – while Hornsby rose 289%, from 400 to 1,555, even as its default risk eased 8% in the quarter. That divergence is precisely how DFA’s lag operates: the stress arrives years before the default follows.
These are higher-income postcodes with larger loan sizes. If the pattern holds, the dollar value of loans moving into default risk over the next three to five years could rise considerably, even if household numbers appear modest by comparison.
