Lapses in car loan repayments at highest level in five years
New data shows delinquencies increasing quarter-on-quarter.
The Australian automotive industry's asset-backed securities (ABS) annualised net loss rate for arrears continued its quarter-on-quarter rise in the first three months of 2016, according to a new research report.
Delinquencies increased 13 basis points to 0.54% in Q1 2016, according to Fitch Rating's latest Dinkum Auto ABS Index of Australia.
Payments more than 30 days in arrears were at a record high of 1.46% despite historically low wage growth. These late repayments represent a rise of 29 basis points, the largest quarterly increase since Fitch began this report in 2010.
Despite recent improvements in the relative living standards of minimum wage recipients, the position of low-paid workers has deteriorated over the past decade resulting in some household incomes placing families below the poverty line.
As wage growth has declined, health insurance premiums have continued to rise.
Fitch believes the lower-than-historical-average wage growth could be a problem for borrower performance. Despite the threat, stable consumer sentiment and falling inflation and unemployment rates point to a more positive future.
The recovery rate for auto lenders will likely decrease as prices for used cars fall. With Australia relaxing importation laws from 2018 to allow the purchase of new vehicles from overseas, used car prices could sink lower still.
However, there is some light at the end of the financial tunnel. From July this year, residents of Sydney can expect their water bills to be about $100 cheaper each year until 2020.