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The home loan delinquency rate has increased year-on-year and is set to continue rising throughout 2019, according to Moody’s Investors Service.
In its latest analysis of Australia’s residential mortgage-backed securities (RMBS) market, Moody’s Investors Service has reported that over 30-day home loan arrears increased by 13 basis points over the year to November 2018, rising from 1.45 per cent to 1.58 per cent.
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Delinquencies increased all states and territories except Queensland, where arrears dropped by 7 basis points from 1.69 per cent to 1.62 per cent over the year to November 2018.
Conversely, the sharpest increase in arrears was in Western Australia, where delinquencies rose by 38 basis points to 2.88 per cent over the same period.
The arrears rate was also highest in Western Australia as at 30 November 2018, followed by the Northern Territory (2.28 per cent), South Australia (1.99 per cent), Queensland (1.62 per cent), Victoria (1.38 per cent), Tasmania (1.32 per cent), NSW (1.19 per cent) and the ACT (1.11 per cent).
In its report, Moody’s noted that the jump in arrears is a “credit negative”, adding that it expects the rise to continue throughout the year.
“We expect Australian mortgage delinquencies to continue to increase on average through 2019 because of high household leverage, subdued wage growth, the conversion of a large number of interest-only mortgages to principal-and-interest loans and declining house prices,” Moody’s stated.
Despite forecasting a continued rise, Moody’s expects the increase to be mild, citing underlying stability in the Australian economy.
Mortgage delinquencies will remain low overall, given the rate of economic growth and historically low unemployment, which will support borrowers’ ability to repay mortgage loans in 2019,” the ratings agency added.
“We forecast real GDP growth of around 2.5 per cent for calendar 2019 and 2020.
Moody’s concluded: “This is largely in line with trend economic growth after a number of years of strong but sub-trend growth. Australia's unemployment rate was 5 per cent in January 2019, and we expect it will remain relatively stable at around 5.5 per cent in 2019 and 2020.”
[Related: Budget 2019-20 released]
