news

Mortgages at greater risk of default

By Staff Reporter

Housing affordability in Australia has deteriorated significantly over the 12 months to October 2015, increasing the risk of delinquency and default.

According to a new report by Moody’s Investors Service titled Housing Affordability Deteriorates, Worst in 14 Years, Australian households with two income earners spent an average of 29.3 per cent of their monthly income on monthly mortgage repayments as of 30 October – up from 28.2 per cent last year.

Sydney households spent an average of 39.2 per cent of their income on mortgage repayments – up from the 36.1 per cent recorded the 12 months prior, and the highest level since 2001.

Housing affordability also deteriorated in Melbourne, where households spent an average of 32.1 per cent on mortgage repayments (compared to 29.1 per cent a year ago), while Adelaide also saw a marginal decline to 21.7 per cent.

However, affordability improved in PerthPerth, TAS Perth, WA (21 per cent, compared to 23.9 per cent a year ago) and is now at its lowest level since 2004, which Moody’s attributed to a decline in house prices. Affordability also improved slightly in Brisbane (23.3 per cent).

The report noted that national housing affordability remains marginally better than the 10-year average, but homeowners in Sydney and Melbourne are paying 5.4 percentage points and 1.8 percentage points more respectively of their monthly incomes towards mortgage repayments than the 10-year average.

Furthermore, the proportion of monthly income needed to meet mortgage repayments will increase by a further 0.4 percentage points to 0.6 points when recent bank rate rises take effect, according to the report.

“Less affordable mortgages increase the risk of delinquency and default, and these risks will increase further once mortgage interest rates rise from their current low levels,” it said.

“New mortgages in Sydney and Melbourne are especially problematic. The higher house prices in these two cities mean larger mortgage loans with more onerous repayment obligations that are moreover being underwritten at current low interest rates.”

Read more: 

Which locations will boom after Sydney?

The Smart Property Investment Show 

When authorities attack: November 2015 

How to find the best property manager 

Should you allow pets in your investment property? 

Mortgages at greater risk of default
SPI logo
Thank you.

Your enquiry has been sent to a local Aussie Mortgage Broker.

We will be in contact with you shortly.
Opps.

error occurred.
Unfortunately Aussie cannot attend to your home loan related enquiry at this stage as you must be a citizen or permanent resident.
Do you need help finding the right loan for your investment?
What Aussie do for you:
  • Give expert mortgage advice to help you find great investment loan deals
  • Help you maximise return by lowering financing costs
  • Save you time and effort by helping with the paperwork
First name
Last name
Location
Mobile Number
Are you an Australian Resident?
promoted stories

Top Suburbs

Highest annual price growth - click a suburb below to view full profile data:
1.
BLUE BAY 49.18%
2.
PAMBULA 43.5%
3.
BERKELEY VALE 42.74%
4.
POINT PIPER 40.52%
5.
NORTH TURRAMURRA 38.12%