Mining towns could see spike in mortgage defaults
While the risk of a property bubble may be abating, a “dual economy” could see more people behind on their mortgages in some areas of Australia.
Genworth Mortgage Insurance chief executive Georgette Nicholas has told the Australian Financial Review that certain areas of the country could see spikes in mortgage defaults. The company, which provides lenders mortgage insurance (LMI) to banks, is preparing for a rise in defaults in regional Queensland and Western Australian areas which heavily relied on the mining boom.
“We are seeing the emergence of a dual economy,” Nicholas told the AFR.
While Nicholas said the company had seen a slight rise in mortgage defaults in mining towns, she said there had been significant spike in the number of loans it considered “at risk”.
But Nicholas echoed the Reserve Bank’s sentiments that the likelihood of the housing market overheating in other areas had diminished. She told the AFR moves by the Australian Prudential Regulation Authority (APRA) had been effective in cooling the market.
"In particular, there has been a significant decline in the proportion of high loan-to-value ratio (LVR) loans originated, given regulatory changes and changes in lender risk appetite,” she told the AFR.
Nicholas said the fundamentals of the mortgage market remained sound, with low rates and stable unemployment.