Invest
Mortgage arrears up in all states and territories
The growing number of arrears across the country reflects households struggling with incremental interest rate hikes and sluggish wage growth, S&P has revealed.
Mortgage arrears up in all states and territories
The growing number of arrears across the country reflects households struggling with incremental interest rate hikes and sluggish wage growth, S&P has revealed.
According to the latest Standard & Poor's Performance Index (SPIN), Australian prime mortgages in arrears jumped from 1.07 per cent in December 2017 to 1.30 per cent in January 2018.
While January often marks an increase in arrears, courtesy of higher December spending, S&P noted the sheer magnitude of the month-on-month increase.
“While improving employment conditions have helped to keep overall mortgage defaults low, high household indebtedness is making borrowers more sensitive to interest rate movements and changes in their economic circumstances,” S&P said.
“We believe the impact of incremental increases in interest rates during 2017 could be a contributing factor to the rise in mortgage arrears in January.”
Continuing, the ratings agency said only time will tell whether more mortgages shift into higher degrees of arrears due to affordability constraints, or are cured.
Western Australia retained the dubious title of the state with the most mortgages in arrears, while loans in arrears of more than 30 days jumped from 2.08 per cent in December to 2.44 per cent in January, marking a new high.
Those most likely to slip into arrears are households nearing the end of their interest-only period on their loans, given the looser lending standards for interest-only loans prior to 2015. As such, these households could be more vulnerable to repayment pain when they shift into a principle and interest structure.
Joining them, those with high loan-to-value ratios (LVRs) are at increased risk of loss should the borrower default, given the lower level of equity. Additionally, borrowers with high LVRs are more likely to have difficulty in refinancing their loan with another lender.
Like those with high LVRs, loans with high debt relative to income are also at higher risk.
S&P explained that these borrowers have less of a buffer to cover their mortgage if they fell into rate hike-induced financial stress.
“The integrity of debt-serviceability standards is important in ensuring that debt-to-income serviceability assessments reflect each borrower's actual income and expenditure patterns,” S&P said.
RELATED ARTICLES
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
Property
Real estate investment: Spotting high-growth potentials
Investing in real estate has long been a favoured approach for Australians looking to grow their wealth. Read more
Property
Granny flats become Aussie families' cost-effective solution to soaring living costs
As the cost of living skyrockets, a forward-thinking trend is sweeping across Australia – granny flats are becoming a favoured living arrangement for older Aussies seeking comfort and proximity to ...Read more
Property
Homebuyers grapple with extended savings period amid affordability crisis
Gone are the days when an Australian dream home seemed just within reach. The path to homeownership in Australia has extended by at least two arduous years, as revealed by the latest insights from ...Read more
Property
Hybrid development unlocks new potential for NDIS housing in metro hotspots
In a ground-breaking strategy aimed at addressing the stark imbalance between the location of Specialist Disability Accommodation (SDA) developments and the actual areas of demand, Aligned Disability ...Read more
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. Read more
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
Property
Real estate investment: Spotting high-growth potentials
Investing in real estate has long been a favoured approach for Australians looking to grow their wealth. Read more
Property
Granny flats become Aussie families' cost-effective solution to soaring living costs
As the cost of living skyrockets, a forward-thinking trend is sweeping across Australia – granny flats are becoming a favoured living arrangement for older Aussies seeking comfort and proximity to ...Read more
Property
Homebuyers grapple with extended savings period amid affordability crisis
Gone are the days when an Australian dream home seemed just within reach. The path to homeownership in Australia has extended by at least two arduous years, as revealed by the latest insights from ...Read more
Property
Hybrid development unlocks new potential for NDIS housing in metro hotspots
In a ground-breaking strategy aimed at addressing the stark imbalance between the location of Specialist Disability Accommodation (SDA) developments and the actual areas of demand, Aligned Disability ...Read more
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. Read more
