Fewer Australians are falling behind on their home loan repayments.
That good news comes from Standard and Poor’s (S&P) latest RMBS Arrears Statistics report with delinquent housing loans in Australian prime residential mortgage-backed securities (RMBS) falling to just 1.00% in November, down from 1.04% in October.
As seen in the chart below, the level of delinquent mortgages contained in prime MBS is now trending lower, a result partially driven by a recent increase in the outstanding level of loan balances.
S&P said loans 30 days past due fell in each of Australia’s state and territories during the month, led by Western Australia which recorded a 0.12 percentage point decline to 2.00%.
Delinquent home loans in New South Wales and Victoria — where most loans originate — also continued to decline, contributing to the fall in the national reading.
“More than 54% of the RMBS portfolio balance is exposed to New South Wales and Victoria combined, and arrears levels in the two states have declined to the lowest level in two years,” S&P said.
“Arrears fell to 0.74% in New South Wales and 0.90% in Victoria. The Australian Capital Territory continued to record the nation’s lowest arrears level, at 0.56%.”
This map from S&P shows how each state and territory fared in November.
The group noted that arrears “typically remain relatively stable in the last few months of the year before a cyclical increase in the first quarter due to higher consumer spending during the seasonal holidays.”
Typically, arrears tend to rise in the early parts of year as those who overspent at Christmas struggle to keep up with loan repayments.
However, while that may occur in the coming months, S&P doesn’t expect it will mark the start of an extended uptrend in arrears.
“We do not expect arrears to increase much above present levels for as long as the current, relatively benign economic conditions continue,” it says, noting that it expects “stable and improving employment conditions and low interest rates” to continue.
It did add the caveat that Australia’s high household indebtedness leaves “borrowers vulnerable to a change in economic circumstances”.