More Australians could fall behind on their mortgages

Adam Smith 1 April 2016

More Australians could fall behind on their mortgages

A weakening economy and resources sector could see mortgage delinquencies edging up.

The number of Australians behind on their mortgages is expected to edge up, and could result in weakening home loan business for banks.

A new report from Moody’s has predicted that Australian mortgage delinquencies will rise over 2016 from their current record-low levels. The ratings agency said below-trend economic growth and the slower pace of house price appreciation will lead to the expected rise in arrears.

"We expect the Australia-wide delinquency rate for mortgages showing more than 30 days in arrears to increase in 2016, but remain at a low level," Moody’s assistant vice president and analyst Alena Chen said.

Chen said while Australia’s growth domestic product (GDP) growth was expected to be toward the upper end of the ratings agency’s 1.5-2.5% forecast range, it would still be below the long-term average of 3.5%.

“We believe this economic backdrop will prompt a slight increase in the Australia-wide mortgage delinquency rate in 2016," Chen said.

While mortgage delinquencies increased across most states, New South Wales saw delinquencies fall to their lowest level since 2005. Moody’s said it expected economic and labour market conditions in NSW to remain healthy and supportive to the mortgage market. In spite of this, the ratings agency said it expected the pace of house price growth in Sydney to continue to slow.

"With delinquencies in NSW remaining steady and those in other states set to continue to edge higher, we expect that the Australia-wide delinquency rate will increase slightly over 2016 but remain low," Chen said.

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