- Australian home loan arrears fell in February after a seasonal spike after Christmas.
- Arrears fell in all states and territories, according to S&P.
- Delinquent loans more than 90 days past due are the exception, remaining at levels well above the average seen over the past decade.
interest-only mortgage lending introduced by Australia’s banking regulator, APRA.
“Half of the interest-only loans in portfolios of residential mortgage-backed securities in Australia will transition to a principal-and-interest repayment structure by 2019.”
In particular, it says owner-occupiers are likely to be hardest hit by having to switch to principal and interest repayments.
“We believe owner-occupiers are more likely than investors to struggle with the transition to principal-and-interest repayments, particularly for loans underwritten before 2015, when lending standards for interest-only loans were not as stringent,” it says.
“Investors typically have a higher net wealth profile and are often in a better financial position to absorb higher repayment costs, particularly given the tax-deductible nature of interest repayments.”
S&P says historical data backs this view, pointing out that investor loan arrears outperformed owner-occupier loan arrears for most of the past 10 years.
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