Moody's expects home loan delinquencies to start rising this year

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Delinquencies on home mortgages will rise slightly this year from current low levels, according to analysis by Moody’s Investors Service.

Arrears will be highest in the states with economies highly dependent on the resources sector — Western Australia, the Northern Territory and parts of Queensland.

The trend is being driven by slower economic growth and an easing in house prices in some cities.

“We expect the Australia-wide delinquency rate for mortgages showing more than 30 days in arrears to increase in 2016 but remain at a low level,” says Alena Chen, a Moody’s analyst.

Moody’s expects GDP growth to be towards the upper end of its 1.5% to 2.5% forecast range for 2016 but this will be below the long term average of 3.5%.

Moody’s conclusions are its latest report on residential mortgage backed securities in Australia.

Here are the places where people are finding it harder to meet mortgage payments:

Mortgage delinquencies in New South Wales declined over the past year to reach the lowest level since 2005.

However, the pace of house price growth in Sydney, which was a key driver of the significant fall in delinquencies, is slowing.

Overall, Moody’s expects the negative influence of slowing house price growth and the positive effect of healthy economic and labor market conditions to balance each other out in NSW, keeping delinquencies at current levels this year.

Across most of the others states, Moody’s expects weaker housing, economic, and labor market conditions to continue to weigh on mortgage delinquency performance.

The proportion of Australian residential mortgages more than 30 days in arrears was 1.20% in November 2015 compared with 1.19% in November 2014.

In Western Australia, the rate rose last year by 0.48 percentage 1.71%, the highest delinquency of all the states and territories.

The Western Australian economy is reliant on the resources sector and has begun to slow as a result of falling commodity prices and weaker demand for iron ore from China.

In Perth, house prices have been declining. They dropped 3.08% over the year to February and 4.13% over the year to November 2015.

The unemployment rate in Western Australia rose significantly to 6.54% in November from 5.26%. It improved slightly to 6.02% in February but average weekly wages dropped by 1.39%.

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