Arrears movements remain ‘mixed’ across Australia

Over 30-day arrears on prime mortgages rose from 0.42 per cent in February to 0.44 per cent in March, while over 60-day arrears fell slightly over the month to 0.26 per cent (down from 0.27 per cent in February).

Prime mortgages more than 90 days in arrears also grew over the month by 1 basis point to 0.79 per cent in March.

The ACT was the only region to record a fall in over 30-day arrears from 1.22 per cent in February to 1.17 per cent in March.  

The portion of prime mortgages in arrears for over 30 days remained static in March in NSW (1.24 per cent) and Victoria (1.39 per cent).

The biggest hike in prime mortgage arrears (16 basis points) was seen in the Northern Territory, where the portion of over 30-day delinquencies rose to 3.31 per cent in March.

This was followed by Western Australia (up 13 basis points to 3.03 per cent), Tasmania (up 10 basis points to 1.15 per cent), Queensland (up 4 basis points to 1.88 per cent) and South Australia (up 1 basis point to 1.6 per cent).

Delinquencies on low-doc mortgages increased substantially nationwide from 6.25 per cent in February to 6.78 per cent in March, while full-doc mortgages rose by 2 basis points over the month to 1.46 per cent.

According to S&P, on a year-on-year basis, the NT, the ACT and Western Australia recorded the largest changes in arrears, with Tasmania the only state to record a year-on-year contraction.

The largest year-on-year increase in arrears, at 0.22 per cent, was recorded in NSW, followed by Victoria at 0.18 per cent and Queensland at 0.16 per cent.

The ratings agency noted that investment arrears increased at a faster rate than owner-occupied arrears over the last 12 months, growing from 1.19 per cent in March 2018 to 1.46 per cent in March 2019.

S&P said this pace of increased investment arrears reflects the expiration of interest-only mortgage contracts.

Owner-occupier arrears, meanwhile, rose from 1.56 per cent in March last year to 1.73 per cent in March this year.

“Arrears have continued to edge upward over the past 12 months, albeit from low levels, despite low interest rates and stable employment conditions,” S&P’s analysis stated.

“In our view, macroeconomic factors that are weighing on mortgage arrears include low income growth, cost of living challenges, underemployment and high household debt.”

The ratings agency expects mortgage arrears to “remain elevated” over the coming 12 months.

“The current lending environment will add to mortgage pressures as it will weigh on refinancing prospects for some borrowers,” S&P’s analysis stated.

[Related: Over 90-day mortgage arrears hit record high]