The proportion of Australian residential mortgages more than 30 days in arrears rose to its highest level in five years, according to Moody's Investors Service.
According to the ratings service, the 30+ delinquency rate rose to 1.62 per cent in May 2017, up from 1.50 per cent in May 2016 and the highest rate since 2013.
Mortgage delinquencies increased to record highs in Western Australia, the Northern Territory and South Australia, the report found, and were also up in Queensland and the Australian Capital Territory over the year to May 2017.
However, arrears declined in New South Wales and Victoria, and fell slightly from record high levels in Tasmania.
Indeed, the 10 regions with the lowest mortgage delinquencies in Australia in May 2017 were all in Sydney and Melbourne, where housing market and economic conditions were “the most supportive for mortgage borrowers”.
The service added that the mining downturn has dampened economic growth in resource-reliant states, such as Western Australia, the Northern Territory and Queensland; eight of the 10 regions with the highest 30+ delinquency rates were in either Western Australia or Queensland.
The service said that it “expects this situation [to] weigh on mortgage performance for some time”.
Moody's further noted that Australia's financial regulators have introduced a range of measures to “improve the quality of lending, curtail mortgage risk, and reduce overall household debt”.
It therefore noted that while aggregate house prices have continued to rise, other metrics like home sales and sales-to-new-listings ratios are softening, which could signal a “cooling” in the housing market.
Speaking of the figures, Alena Chen, a Moody's vice president and senior analyst, commented: “We expect delinquencies to continue to increase through the remainder of 2017, as weaker conditions in states reliant on the mining industry, high underemployment and less favourable housing market and income dynamics will continue to drive the rate higher."
Ms Chen continued: "With Australia's two core housing markets, we note that prices in Sydney and Melbourne rose [by] 12.37 per cent and 15.93 per cent, respectively, over the year to July 2017, and [by] 11.08 per cent and 11.52 per cent over the year to May 2017.
“Rising house prices have supported mortgage performance in these states, giving borrowers at risk of, or already in arrears, the option to sell their properties quickly for a good price to repay their loans.
"However, as house prices continue rising without a corresponding increase in incomes to pay for the more expensive houses, housing affordability decreases and the risk of delinquencies and defaults rises."
Earlier this week, fellow credit ratings agency S&P revealed that the number of delinquent housing loans underlying Australian prime residential mortgage-backed securities (RMBS) increased to 1.17 per cent in July 2017, up from 1.15 per cent in June.
S&P Global Ratings said that the rise in mortgage delinquencies was partly influenced by a fall in outstanding loan balances during July.
The report found that prime RMBS arrears were up by 0.01 per cent year-on-year but remained below the July average for the past 10 years of 1.25 per cent.
It concluded: “Arrears for loans underlying prime and nonconforming RMBS portfolios are holding steady. With continued jobs growth and unemployment rates remaining relatively stable, we expect this trend to continue. Stable employment conditions and low interest rates are undoubtedly supporting the low arrear levels in most Australian RMBS transactions.
“High household debt and stagnant wage growth increase more borrowers' sensitivity to a change in economic conditions, but we do not expect the loans underlying Australian RMBS transactions to deteriorate in the short to medium term while stable employment conditions persist.”
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