Borrow
Reserve Bank alleviates mortgage arrears fear
Despite the rate of mortgage-holders falling behind on their repayments at an all-time high, the RBA has said that it is not concerned about further mortgage stress.
Reserve Bank alleviates mortgage arrears fear
Despite the rate of mortgage-holders falling behind on their repayments at an all-time high, the RBA has said that it is not concerned about further mortgage stress.
In a speech made at the FINSIA gathering, RBA deputy governor Guy Debelle noted that newer loans have stronger regulations and older mortgages are partly to blame for the rising number of Australians missing repayments.
As such, the deputy governor does not predict arrears to continue to rise as lower rates of credit ease the burden on mortgage-holders.
“The mortgage arrears rate, at 1 per cent, is low by both historical and international standards. Arrears in the US peaked at around 10 per cent in the financial crisis,” Mr Debelle explained.
Despite the Reserve Bank cutting rates three times this year, Mr Debelle said arrears have increased from 0.7 per cent to 1.8 per cent.
“This is a significant rise and associated with financial stress for a number of households. But it is still not that high given the economic circumstances,” Mr Debelle said.
Western Australia and the Northern Territory have been affected more than other regions of Australia due to high unemployment and falling house prices, Mr Debelle explained. However, he believes the new regulation will help lower the risk of arrears.
“Tighter lending standards should lead to lower arrears, but this can be hard to discern in the raw data. One reason is that borrowers’ circumstances tend not to change so quickly that they fall behind on their repayments soon after taking the loan out, so newer loans tend to have lower arrears rate than older loans,” Mr Debelle explained.
In all states, increases in the share of housing loans that are 90-plus days in arrears have mainly been driven by loans remaining in arrears for longer rather than an increase in new loans entering arrears.
This is consistent with the softer housing market, the deputy governor said.
RELATED ARTICLES
About the author
About the author
Loans
Navigating the Australian student loan landscape: Options for financing your education
Securing financing for post-secondary education is a significant step for many Australians, offering a pathway to advancing career prospects and achieving personal growth. Read more
Loans
Secured vs. unsecured personal loans: Which is right for you?
When considering a personal loan in Australia, one of the first decisions you'll face is whether to opt for a secured or an unsecured loan. Each type has distinct advantages and drawbacks, and the ...Read more
Loans
Weighing up interest-only home loans: What Australian borrowers need to know
Interest-only home loans have become a topic of considerable interest among Australian borrowers, offering a unique approach to home financing. This type of loan allows borrowers to pay only the ...Read more
Loans
Bridging loans demystified: Navigating your next property purchase in Australia
Navigating the property market can be daunting, especially when timing issues arise between selling your current home and purchasing a new one. Bridging loans offers a solution, providing the ...Read more
Loans
Ultimate guide to green loans: Financing sustainable home projects in Australia
As Australians become increasingly conscious of their environmental impact, many are turning to sustainable home improvements to reduce their carbon footprint and enhance energy efficiencyRead more
Loans
CBA launches digital home loan with 10-minute application
According to the bank, Unloan will provide a single low-cost interest rate to borrowers with an application time of as little as ten minutes. Read more
Loans
Are central banks weighing the economic pain of rate hikes?
The hype around interest rate hikes usually centres around the urgent and fundamental need to alleviate the consequences of inflation – but does this monetary policy do more harm than good? Read more
Loans
As rates begin to rise, how much more will new borrowers pay?
Mortgage holders could be asked to pay over $1,000 more per month due to rising interest rates. Read more
Loans
Navigating the Australian student loan landscape: Options for financing your education
Securing financing for post-secondary education is a significant step for many Australians, offering a pathway to advancing career prospects and achieving personal growth. Read more
Loans
Secured vs. unsecured personal loans: Which is right for you?
When considering a personal loan in Australia, one of the first decisions you'll face is whether to opt for a secured or an unsecured loan. Each type has distinct advantages and drawbacks, and the ...Read more
Loans
Weighing up interest-only home loans: What Australian borrowers need to know
Interest-only home loans have become a topic of considerable interest among Australian borrowers, offering a unique approach to home financing. This type of loan allows borrowers to pay only the ...Read more
Loans
Bridging loans demystified: Navigating your next property purchase in Australia
Navigating the property market can be daunting, especially when timing issues arise between selling your current home and purchasing a new one. Bridging loans offers a solution, providing the ...Read more
Loans
Ultimate guide to green loans: Financing sustainable home projects in Australia
As Australians become increasingly conscious of their environmental impact, many are turning to sustainable home improvements to reduce their carbon footprint and enhance energy efficiencyRead more
Loans
CBA launches digital home loan with 10-minute application
According to the bank, Unloan will provide a single low-cost interest rate to borrowers with an application time of as little as ten minutes. Read more
Loans
Are central banks weighing the economic pain of rate hikes?
The hype around interest rate hikes usually centres around the urgent and fundamental need to alleviate the consequences of inflation – but does this monetary policy do more harm than good? Read more
Loans
As rates begin to rise, how much more will new borrowers pay?
Mortgage holders could be asked to pay over $1,000 more per month due to rising interest rates. Read more
