Australian mortgage delinquencies increased in the year to September 2010 as interest rate increases hit households, according to a report by Fitch Ratings.
By September 2010, one per cent of home loan borrowers by number were one month or more behind on repayments, up from 0.81 per cent a year earlier, Fitch said in a report released on Tuesday.
By value, the delinquency rate rose to 1.54 per cent from 1.23 per cent from a year earlier.
“It’s not a small move. It’s a considerable move,” said Fitch’s structured finance team associate director, James Zanesi.
“One of the main reasons is the interest rate increases.”
Mr Zanesi said the level was not yet worrying, and certainly nowhere near levels in the UK or US.
It also still was well below the almost two per cent delinquency rate, by value, reached in Australia in 2008.
The deterioration in arrears to September 2010 coincided with six interest rate increases by the Reserve Bank of Australia (RBA) to 4.5 per cent from three per cent. The RBA has raised the overnight cash rate once more since September, to 4.75 per cent, last month.
The average standard variable rate home loan was at 7.4 per cent by September.
Arrears of 30 days or more were as high as 1.76 per cent by number in the worst region of Fairfield-Liverpool in Western Sydney, which was a slight improvement from a year earlier.
“Socio economic variables like the unemployment rate and income are playing a part,” Mr Zanesi said.
“They are more sensitive to interest rate rises.”
Nelson Bay was by far the worst postcode with a 3.3 per cent of borrowers a month behind on repayments, equivalent to eight per cent by value.
Nelson Bay, like other coastal communities, had quite a few holiday houses which tended to be hit by mortgage delinquencies first when rates increase.
Western Australia was the worst state, with 1.52 per cent of borrowers a month or more behind in repayments.
In South West WA, 2.82 per cent of borrowers were behind.
“It’s like a contradiction,” Mr Zanesi said. The higher rate of delinquencies in WA was despite that state leading the mining boom.
Mr Zanesi said the housing market in Perth had stagnated and borrowers there also were very sensitive to interest rate increases.
Fitch analysed Australia’s residential mortgage market using data on about 900,000 loans with a total balance of $155 billion.