NSW drives national rise in mortgage arrears

The data revealed that arrears rose in every state except Tasmania, where they dropped from 1.26 per cent to 1.14 per cent.

The sharpest arrears jump was in NSW, where delinquencies increased from 1.04 per cent to 1.12 per cent.

The state with the highest underlying arrears figure was Western Australia (2.58 per cent), followed by the Northern Territory (2.38 per cent), Queensland (1.67), South Australia (1.42 per cent), Victoria (1.22 per cent), Tasmania (1.14 per cent), NSW (1.12 per cent), and the ACT (0.87 per cent).  

S&P also reported that when broken down, arrears on both owner-occupied and investor loans increased, with owner-occupied arrears rising from 1.52 per cent to 1.54 per cent, while investor loan arrears increased from 1.19 per cent to 1.25 per cent.

The ratings agency attributed the sharper increase in investor loan arrears (0.06 per cent) to the repricing of investor and interest-only loans.

Moreover, S&P reported that regional banks, followed by non-banks and major banks recorded the largest increases in arrears during October, but noted that movements in percentage terms can “mask or inflate” underlying trends when assessed in isolation.

The ratings agency made reference to the higher arrears rates among regional banks since the GFC, as a result of their higher exposure to regional arrears, which have been affected by drought and the downturn in the mining sector.

S&P also observed that despite relatively higher arrears among non-bank mortgages in the prime sector have continued to trend downward.

S&P concluded that while national arrears are “elevated”, they “remain low overall”, adding that the delinquency rate is “unlikely to rise much further above current levels”, citing positive employment conditions and the “strong” collateral quality of most portfolios.

[Related: Arrears drop by still ‘noticeably’ high]