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Australian mortgage arrears stabilise in June

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Reporter 4 minute read

Prime mortgage arrears held relatively steady in June, after increasing in four states but decreasing in the four remaining states and territories, according to new statistics from Standard & Poor’s.

S&P’s Performance Index (SPIN) on prime mortgages slipped just 1 basis point from 1.52 per cent in May to 1.51 per cent in June, though the arrears rate in June varied across Australia. 

Arrears on prime home loans decreased month-on-month in Queensland (from 1.93 per cent to 1.91 per cent), South Australia (from 1.57 per cent to 1.52 per cent), the Northern Territory (from 3.1 per cent to 2.9 per cent), and ACT (from 1.2 per cent to 1.14 per cent).

However, delinquencies rose over the month in June in Western Australia (from 3 per cent to 3.05 per cent), Tasmania (from 1.2 per cent to 1.27 per cent), and NSW (from 1.24 per cent to 1.26 per cent) but remained stable in Victoria (1.4 per cent). 

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Despite the national decline in arrears, when compared to June 2018, prime mortgage arrears increased 13 basis points from 1.38 per cent and remained above the five-year average of 1.25 per cent.

Investment arrears fell just 1 basis point to 1.47 per cent over the month in June, while owner-occupier arrears rose 1 basis point to 1.74 per cent. 

According to S&P, owner-occupier arrears have continued to creep up toward their long-term peak of 1.83 per cent, despite interest rates being approximately 3 per cent lower. 

“This reflects borrowers’ increased debt-serviceability pressures in a low wage-growth environment,” the ratings agency said.

Prime arrears varied across the major banks, regional banks and non-banks. 

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For major banks, prime SPIN increased 4 basis points over the month to 1.89 per cent in June, while it decreased significantly, by 21 basis points, across the regional banks to 2.54 per cent. 

Prime SPIN for non-banks also rose 4 basis points over the month to 0.47 per cent in June but fell by 6 basis points to 0.67 per cent for non-bank originators. 

Meanwhile, arrears on non-conforming loans declined by 8 basis points month-on-month to 3.55 per cent in June. 

S&P expects arrears to stabilise in the July-September quarter due to cuts to interest rates and taxes. 

“These stimuli will have a greater effect on the less-severe arrears categories, which historically have been more sensitive to interest rate cuts,” the ratings agency said.

“Improvements in housing market conditions also should help bolster lending conditions and improve borrowers’ refinancing prospects.”

[Related: Arrears to ‘stabilise’ in response to rate relief]

Australian mortgage arrears stabilise in June
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