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Banks brace for historically high arrears

by Staff Reporter8 minute read
The Adviser

Staff Reporter

Mortgage arrears in Australia are expected to rise next quarter as Australians feel the pinch of earlier rate hikes, a new report has found.

According to a Fitch Ratings report released yesterday, mortgage arrears in Australia fell in the second quarter but, this is likely to change in the third quarter, especially among marginal borrowers who have taken out “low doc” loans.

“The risk is that the increase in cash rates will generate an interest rate shock on households during the third quarter of 2010,” the Fitch report read.

“If so, arrears might increase further, and in the low doc conforming sector they might reach a new historical high.”

Home borrowers that are more than 30 days behind on their repayments fell to 1.32 per cent last quarter – down from 1.38 per cent.

Among low doc borrowers, arrears increased slightly in the second quarter – rising from 17.7 per cent in the first quarter to 18.2 per cent.

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