Reflecting stronger labour market conditions and a broad-based recovery across the economy, the number of Australians falling behind on their home loan repayments continues to decline.
According to rating’s agency Standard and Poor’s (S&P), delinquent housing loans contained in Australian prime residential mortgage-backed securities (RMBS) fell to just 1.04% in October, continuing to decline from the levels reported earlier in the year.
This chart from S&P shows the reduction in the percentage of delinquent home loans over the past year, falling from 1.29% in January 2017.
“Arrears declined in most states during October,” S&P said, noting that the sharpest improvement was recorded in “mortgages more than 90 days past due”.
“The Australian Capital Territory recorded the lowest arrears levels, at 0.58%. Home loan arrears also declined in New South Wales and Victoria, but by smaller magnitudes.
“In New South Wales, arrears fell to 0.75% in October — the second-lowest in the country — from 0.79% in September. In Victoria, arrears declined to 0.94% from 0.96% the previous month.”
This map shows the percentage of home loan arrears in October compared to the levels reported in September.
Like the trend seen in Australia’s southeastern states and territories, there was also good news from Australia’s mining states and territories, Western Australia, Queensland and the Northern Territory.
“Queensland and Western Australia, where arrears have been more elevated for some time, recorded another month-on-month decline in mortgage delinquencies,” S&P said.
“In Queensland, arrears fell to 1.39% in October from 1.47% in September. In Western Australia, they declined to 2.12% from 2.21% a month earlier, against a backdrop of increasing loan balances.”
In the Northern Territory, where prices are falling faster than in any other state and territory right now, arrears also declined, falling to 1.57% from 1.7% in September.
Elsewhere, arrears fell by five basis points in South Australia to 1.27%. Tasmania, at 0.89%, was the only state to record an increase in arrears from September.
For the non-conforming mortgage sector, S&P said that arrears also fell, reaching a near-historic low of 3.99%.
Non-conforming mortgages are made out to borrowers who typically would not qualify for a loan from a traditional prime lender.
S&P said the improvement in arrears reflected “improving employment conditions and low interest rates [which] have helped to keep mortgage arrears low”.
However, despite the ongoing improvement, it cautioned that “risks remain”.
“Australia’s high household indebtedness, which has outpaced income and GDP growth for some time, leaves borrowers vulnerable to a change in economic circumstances,” it said.
“We do not expect arrears to increase much above current levels while these relatively benign economic conditions persist”.
According to recent date released by the Australian Bureau of Statistics (ABS), the number of Australians in employment jumped by 61,600 in November, taking the increase on year earlier to 383,300, the second-fastest annual growth on record.
Over the year, full-time employment increased by 304,600, far outpacing a 78,700 increase in part-time employment, keeping the unemployment rate steady at a multi-year low of 5.4% despite a sharp increase in the number of Australians either in employment or looking for work.
Other indicators such as ANZ’s Stateometer — a gauge of economic performance across Australia’s states and territories — has also improved noticeably this year with activity levels improving in most parts of the country, including mining regions.