Home loan arrears improved in August, with the Australian mortgage Standard & Poor’s Performance Index showing a decline from 1.49 percent in July to 1.41 percent.
“Arrears typically decline in June and throughout the third quarter. Mortgage arrears were up 13 basis points year on year in June and above the five-year average of 1.25%.”
“Arrears fell in Queensland, South Australia, Northern Territory, and Australian Capital Territory, but rose in Western Australia, Tasmania, New South Wales, and Victoria. Arrears continued to rise in Western Australia, despite a small improvement in May, increasing to 3.05% from 3.00% a month earlier. South Australia recorded the largest month-on-month improvement, with arrears falling 5 basis points to 1.52%.”
“Investment arrears were almost unchanged in June, falling 1 basis point to 1.47%, and owner-occupier arrears rose 1 basis point to 1.74% from a month earlier. Owner-occupier arrears have continued to rise toward their long-term peak of 1.83%, despite interest rates being around 3.00% lower. This reflects borrowers’ increased debt-serviceability pressures in a low wage-growth environment,” according to spglobal.com
Arrears (borrowers late with their mortgage repayments) dropped nationally in all states and territories, with Western Australia reporting the highest drop, falling from 2.91% in July to 2.75% in August.
For all borrowers,the rate of mortgage arrears increased, with regional banks reporting the largest increase, dropping 29 basis points to 2.18 percent in August. The change can be due to recent interest rate cuts that have been successful in helping the property and finance market in Australia, says RBA Governor Philip Lowe.
He says the housing market is now turning around, which in turn will support consumption and the labor market, leading to further growth. S&P Global experts expect short-term arrears to continue to fall as the latest rate cuts begin to filter through.