The vast majority of Australians continue to pay their home loan on time

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  • The proportion of Australians falling behind on their home loan repayments remains well below average, standing at just 1.18% in March.
  • Arrears between 30 to 90 days are trending lower, while those 90 days past due are edging higher.
  • S&P expects tighter lending standards will potentially slow credit growth and potentially impact prices, but it doesn’t expect that will lead to an increase in arrears over the short to medium-term.

The proportion of Australians falling behind on their home loan repayments remains well below average.

According to Standard and Poor’s (S&P) latest RMBS Arrears Statistics report, delinquent housing loans contained in Australian prime residential mortgage-backed securities (RMBS) rose marginally in March, lifting to 1.18% from 1.16% a month earlier.

Even with that modest lift, arrears were almost unchanged from a year earlier, and well below the 1.31% average seen over the past decade.

On a more granular level, S&P said delinquencies fell in New South Wales, Queensland, South Australia and the ACT, while Western Australia, still emerging from an economic downturn linked to commodity prices and investment, remained the state with the nation’s highest arrears, lifting 0.1 percentage points to 2.37%.


As seen in the chart below from S&P, the percentage of loans less than 90 days in arrears continues to trend lower, while those 90 days past due are increasing, leaving overall delinquency levels steady over the year.


“From a structural perspective, we have observed a change in the composition of arrears,” S&P said in a statement.

“Arrears more than 90 days past due made up around 60% of total arrears in March 2018, up from 34% a decade earlier.

“This shift partly reflects a change in the reporting of arrears for loans in hardship that came in response to regulatory guidelines.

“Even accounting for this, however, there has been a persistent rise in this arrears category, though the level of arrears overall remains low.”

S&P expects recent trends to be maintained throughout the year, noting that an expected gradual decline in the unemployment will help to keep overall arrears stable.

Like other analysts, S&P says home loan lending standards are likely to tighten following the conclusion of Australia’s Banking Royal Commission, potentially leading to slower credit growth and further weakness in prices.

However, it doesn’t expect that will lead to upwards pressure in arrears, at least in the short to medium-term.

“We believe a slowdown in lending growth is unlikely to create material pressure on mortgage arrears in the next 12 months… given the high seasoning and resulting build up in equity of many of the loans,” it says.

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