The FINANCIAL — Australian mortgage arrears are at the highest level in five years, Fitch Ratings says in its latest Dinkum RMBS Index report.
The 30+ day mortgage arrears rose by 9bp qoq to 1.30% in 1Q24, continuing the increase from 2023. Early stage arrears increased by 3bp to 0.48%, the highest 30-59 day arrears rate seen in the index since February 2016. Meanwhile, 30+ day mortgage arrears in Fitch’s non-conforming index were up by 49bp qoq; the third successive qoq increase, leaving non-conforming arrears at the highest level since the beginning of the Covid-19 pandemic in 2019.
Historically, arrears increase in the first quarter due to Christmas spending, but this increase is smaller than in prior years. This most likely indicates that persistent inflation and the 4.25pp hike in official interest rates since mid-2022 are affecting some borrowers.
Australia home prices rose by 1.6% qoq and 8.9% yoy, bringing prices to a new all-time high at the end of 1Q24. Prices have risen nationally since that time, to be up by 3.0% year to date at end-May 2024. Fitch expects prices to rise by 4%-6% in 2024 amid limited supply, a tight rental market and high net migration. Losses from the sale of collateral property should also stay low, supported by strong home-price growth over previous years for most borrowers.
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