S&P says the number of delinquent housing loans have fallen unexpectedly in Australia

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Standard & Poor’s detected a sudden fall in problem mortgages in February, a month when delinquencies usually rise.

The number of delinquent housing loans in Australia fell to 1.23% in February, down from January’s 1.29%, according to the RMBS Arrears Statistics: Australia report, by S&P Global Ratings.

“We normally expect arrears to increase month-on-month in February, reflecting the seasonal effects of Christmas spending and summer holidays,” says S&P.

“The month-on-month decline was unexpected, particularly at a time of rising interest rates.”

Most of the big banks last month raised rates for owner-occupier loans and for interest only loans.

S&P expects these rate increases will put further pressure on arrears.

The S&P report shows that mortgages 31 to 60 days in arrears recorded the greatest improvement in February after recording the largest increase in January.

“The month-on-month decline in arrears in February could mean that some of the rise in arrears in January was partly due to the timing of mortgage-rate
increases,” says S&P.

“Mortgage-rate increases can create an initial spike in arrears when first applied, particularly if they are introduced when more borrowers are likely to be on holidays. This might account for part of the increase we observed in January.”

Here’s a state by state breakdown of mortgage arrears:

Source: S&P

Victoria and New South Wales, which together make up more than 54% of the total loans, both recorded a month-on-month decline in arrears.

Queensland was unchanged at 1.65%, the ACT rose to 0.81% from 0.78% in January and Tasmania was up to 1.51% from 1.47%.

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