Sydney leads capital city house price growth
After a tumultuous year, most capital cities are now rebounding as vendor confidence continues to improve. ...
Mortgage delinquencies are expected to peak on the back of an uneven economic recovery post-COVID, a new report has revealed.
While mortgage delinquency rates followed a downward trend up until November 2020, new data from Moody’s Investor Services has suggested delinquency risks are rising, especially in areas dependent on tourism and hospitality.
According to Moody’s, up until November 2020, mortgage delinquency rates declined on average in every Australian state, territory, capital city and most regions.
In November 2020, the proportion of Australian residential mortgages that were more than 30 days in arrears (30-plus days delinquency rate) was recorded at 1.44 per cent, down from 1.99 per cent in May 2020 and 1.82 per cent in November 2019.
In fact, every state and territory saw their delinquency rates improve, with Western Australia leading with the charge with the biggest annual decline of 0.89 per cent, followed by Tasmania with 0.70 per cent, Northern Territory with 0.65 per cent and South Australia with 0.52 per cent.
But it was the ACT that clocked the lowest delinquency rate at 0.66 per cent in November, followed by Tasmania with 0.83 per cent.
However, looking ahead, Moody’s is confident in a moderate increase in home loan arrears over the coming months, with varying levels of incline across states, cities and regions. This, the ratings agency said, will be primarily due to uneven economic recovery from the COVID-induced downturn.
Despite forecasting GDP growth of 3.8 per cent in 2021, Moody’s flagged that conditions will improve for some individual businesses, sectors and regions, but they will remain difficult for others.
Moreover, the end of lender and government support measures is tipped to influence the increase in delinquency rates.
“Coronavirus-related government income support measures and lender loan payment deferrals supported borrowers to repay mortgages over the second half of 2020, but most of these measures ended in March 2021,” Moody’s vice president and senior credit officer Alena Chen said.
Despite a negative forecast for the coming months, overall delinquency rates are expected to remain low on the back of rising house prices, an improving labour market and low interest rates.
The report highlighted an average 2.8 per cent increase in capital city house prices over March 2021 – the largest monthly increase since October 1988.
“Rising house prices make it easier for borrowers in financial difficulty to sell their properties and repay mortgages, which will curb mortgage delinquencies during the uneven recovery,” Ms Chen explained.
The vice president noted that conditions are expected to improve by the end of the year.
“Towards the end of 2021, mortgage delinquency rates will improve as economic momentum builds,” she concluded.