The Urban Developer
AdvertiseEventsWebinars
Urbanity
Awards
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
Untitled design (8)
22 DAYS UNTIL OUR UNMISSABLE FLAGSHIP CONFERENCE MORE THAN 500 ALREADY ATTENDING
22 DAYS UNTIL OUR FLAGSHIP CONFERENCE 500+ ALREADY ATTENDING
SECURE YOUR SPOTDETAILS
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
ADVERTISEMENT
SHARE
12
print
Print
ResidentialDinah Lewis BoucherFri 22 Mar 19

Mortgage Delinquencies to Rise ‘Moderately’ as House Prices Decline

50234ced-416f-42da-a4da-ec4bf89d78ed

Mortgage arrears are likely to increase amid falling house prices, record-high household debt and the conversion of interest-only mortgages to principal and interest loans, according to latest Moody’s research.

Moody’s Investors Service says the increase in mortgage delinquencies will be moderate, while defaults and losses will remain low, given stable GDP growth and low unemployment will help limit delinquency growth.

The 30-day delinquency rate for Australian residential mortgage-backed securities (RMBS) increased slightly from 1.49 per cent in September 2018 to 1.58 per cent in December 2018.

Moody’s forecasts property prices will continue to record moderate falls through 2019, while record-high household debt — at 191 per cent of annual gross disposable income — will also contribute to a moderate increase in delinquencies.

Australia's high household debt is mostly due to housing, with very little debt related to non-housing loans.

The Reserve Bank highlighted two domestic vulnerabilities being the level of household debt, and the slowdown in housing and credit markets, describing them as “heightened”, this week.

“Just as housing costs have been an important driver of household debt, so too has the ability to borrow larger amounts influenced the price of housing,” RBA assistant governor Michelle Bullock said on Wednesday.

Related: Housing Market Correction Hits GST Revenue Gains: Moody’s

House prices in Australia declined by 6.3 per cent for the 12 months to February 2019, and by 10.4 per cent and 9.1 per cent in largest capital city markets Sydney and Melbourne.


Last month, analysis by Morgan Stanley and AlphaWise said about 650,000 Australian borrowers, with loans worth around $230 billion, were “trapped” in interest-only loans and could struggle to refinance once interest-only periods end.

Moody’s vice president and senior analyst Alena Chen said the Investors Service expects defaults and losses will remain low.

“As continued GDP growth and low unemployment will continue support borrowers' ability to meet mortgage repayments," Chen said.

Real GDP growth is forecast of around 2.5 per cent in both 2019 and 2020, while Australia’s unemployment rate to remain relatively stable at 5.5 per cent over the same period.

“Mortgage delinquencies will likely increase over the short term in areas hit by the far north Queensland floods in February 2019, as borrowers may lose income or face costs while dealing with the aftermath of the disaster," Chen said.

Although Moody’s says this is unlikely to translate into a material increase in defaults, given that insurance payouts, government assistance and financial hardship arrangements entered into with lenders will ease the burden on borrowers.

ResidentialAustraliaMelbournedo not useFinanceReal EstateSector
AUTHOR
Dinah Lewis Boucher
More articles by this author
ADVERTISEMENT
TOP STORIES
Bates Smart Richmond Sportslink HERO
Exclusive

BtR Focus Drives Bates Smart’s Richmond Sportslink Concept

Leon Della Bosca
6 Min
Exclusive

Carparking Correlation: How Parking Fees Provide Office Sector Health Check

Taryn Paris
6 Min
Molti chief Ben Teague out front of 32 Mercer Road Aramadale (rendering)
Exclusive

Buy to the Sound of Cannons: Molti’s Counter-Cyclical Move to Melbourne

Leon Della Bosca
5 Min
Exclusive

Tapping the Bunnings ‘Halo Effect’

Taryn Paris
5 Min
Exclusive

‘Construction Not a Scale Game’: Hutchinson

Phil Bartsch
9 Min
View All >
Industrial

Data Centres Drive Goodman Group A-REIT Success

Taryn Paris AND Shravanth Reddy
Dexus Sydney CBD Supertall EDM
Planning

City Backs Height Boost for Sydney Supertall Towers

Vanessa Croll
Residential

Thirdi Lifts Covers on 500-Home Precinct at Gladesville

Lindsay Saunders
The developer says build-to-rent and build-to-sell would be part of the transformation of an ageing Sydney shopping cent…
LATEST
Industrial

Data Centres Drive Goodman Group A-REIT Success

Taryn Paris AND Shravanth Reddy
3 Min
Dexus Sydney CBD Supertall EDM
Planning

City Backs Height Boost for Sydney Supertall Towers

Vanessa Croll
3 Min
Residential

Thirdi Lifts Covers on 500-Home Precinct at Gladesville

Lindsay Saunders
2 Min
Construction workers building social housing in Gosford, New South Wales.
Affordable & Social Housing

Housing Australia Adds 18,000 Homes as Contracts Confirmed

Marisa Wikramanayake
2 Min
View All >
ADVERTISEMENT
Article originally posted at: https://theurbandeveloper.com/articles/delinquencies-to-rise-moderately-as-house-prices-decline