Over 90-day mortgage arrears hit record-high

The latest data from S&P Global Ratings has revealed that delinquencies underlying Australia’s residential mortgage portfolio increased across the country in December, with over 30-day arrears increasing from 1.33 per cent to 1.38 per cent.

Mortgages more than 90 days in arrears rose to a record high of 0.75 per cent in December, with a total of 55 per cent of all prime mortgage arrears more than 90 days overdue, up from 39 per cent five years ago.

S&P said that the spike reflected the “influence of Christmas spending and the holiday season”.

Home loan delinquencies increased nationwide, with the exception of Tasmania, where arrears fell to 1.12 per cent in December from 1.16 per cent the previous month.

The Northern Territory recorded the sharpest increase in mortgage arrears in December, which rose to 2.77 per cent, up from 2.40 per cent in November.

According to S&P, mortgage arrears continued to rise in Queensland and Western Australia and are more elevated than in other parts of the country at 1.73 per cent and 2.73 per cent, respectively.

The ratings agency noted that more than 63 per cent of the loans in arrears in Queensland are for properties in non-metropolitan areas and added that drought and flood conditions are likely to keep arrears elevated in the coming months.

Further, S&P’s data revealed that loans in arrears in Western Australia were mostly for properties in metropolitan areas, with only 14 per cent recorded in non-metropolitan areas. Over 60 per cent of all loans in arrears in Western Australia were more than 90 days overdue, up from 41 per cent five years ago.

S&P said that it expects regional RMBS mortgage arrears to remain elevated due to their higher exposure to Queensland and Western Australia.

Moreover, mortgage arrears at non-bank originators rose to 0.70 per cent in December from 0.62 per cent, which S&P said could reflect non-bank portfolios’ higher proportion of less-seasoned loans that have not had time to “build up a mortgage repayment track record”.

According to S&P, the non-bank sector’s higher exposure to less-seasoned loans could make earlier arrears categories more sensitive to interest-rate movements.

S&P concluded that it expects refinancing pressures to continue in the current environment of tightened lending conditions, which could affect borrowers with weaker credit attributes, such as those with high loan-to-value ratio loans.

[Related: Loans to linger in arrears for longer]