Research by global ratings agency Moody’s reveals that mortgage customers are increasingly defaulting on their payments – albeit at low official cash rates – as house prices slide and equity falls.
While the national 30-day delinquency rate remained steady at 1.8 per cent in the 12 months to May 2012, they have spiked sharply in vast swathes of mortgage belts across Australia.
Almost six home borrowers in 100 are 30 days or more behind on their mortgage payments in the nation’s worst-performing regions, and delinquencies are not expected to ease unless Australia’s long-term unemployment rate falls and lenders pass on full rate cuts in their loans, Moody’s says.
Outer South Western Sydney continued to shoulder the poorest delinquency rate during the 12 months, with the region having more than three in 100 borrowers at least 30 days behind on their payments.
Queensland’s Gold Coast continues to hold the dubious title of being the worst-performing postcode with 5.33 per cent of borrowers a month or more behind on repayments and 2.73 per cent more than three months in arrears.
And although delinquencies have fallen in Queensland and New South Wales, the states have had the highest 30-day default levels for two consecutive years, both at two per cent.
Brisbane and Sydney carried the heaviest 30-plus delinquency tolls of the capital cities during the 12 months, at 2 per cent which Moody’s says is considered ”poor”. Perth was in third place with a “satisfactory” 1.7 per cent. Melbourne and Adelaide had the lowest arrears of 1.5 per cent.
Moody’s senior analyst Arthur Karabatsos says disparity between regions persists with the regions with higher delinquencies in mortgage belts with higher proportion of workers in the sectors of tourism, manufacturing and construction.
“The Gold Coast and Sunshine Coast’s dependency on tourism and the Australian dollar, as well as construction, have contributed to the regions faring poorly in terms of arrears,” Mr Karabatsos says.
He says borrower equity is a stronger driver of delinquencies than house price falls.
“House prices in Sydney’s Lower North Shore have suffered the city’s sharpest declines of 14 per cent (during the 12 months to May), yet the region has the lowest defaults because of the relatively high equity levels.”
Regions with lower defaults have relatively more professional and government workers, he says.
The report also shows that delinquencies declined the most in mining regions of Western Australia, Queensland and the Northern Territory.