Mortgage Delinquencies

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<p>S&amp;P Global Ratings has reported that Australia's prime SPIN 30+ day delinquencies declined a little further from 1.08 per cent to 1.04 per cent in October 2017.</p>
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<p>31-60 day prime mortgage arrears have now been tracking at historic lows since June 2017.</p>
<p>There's still a bit happening in the 90+ days space, but arrears have been improving here too since May.</p>
<p>Year-on-year mortgage arrears were comfortably lower.</p>
<p><a href="https://1.bp.blogspot.com/-KxfCYFuanl0/Wjgn0DCCqvI/AAAAAAAAnks/ALly7UBUGHcvhI-sIXAjjgrxzzHjIXxuQCLcBGAs/s1600/S%2526P%2BArrears.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-KxfCYFuanl0/Wjgn0DCCqvI/AAAAAAAAnks/ALly7UBUGHcvhI-sIXAjjgrxzzHjIXxuQCLcBGAs/s640/S%2526P%2BArrears.jpg" width="640" height="380" data-original-height="800" data-original-width="1347"></a></p>
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<div>Declines were reported in all mainland states and territories. </div>
<br><div><a href="https://2.bp.blogspot.com/-c-AKP9xZqh8/WjddO7rxMYI/AAAAAAAAnj4/lQtqxkBFhFUyC2hsBnDCSK4yElKrWBc6ACLcBGAs/s1600/SandP.jpg" target="_blank"><img src="https://2.bp.blogspot.com/-c-AKP9xZqh8/WjddO7rxMYI/AAAAAAAAnj4/lQtqxkBFhFUyC2hsBnDCSK4yElKrWBc6ACLcBGAs/s400/SandP.jpg" width="400" height="327" data-original-height="646" data-original-width="788"></a></div>
<br><div>Source: S&amp;P Global Ratings</div>
<br><div>Western Australia continued to have the highest rate of 30-day arrears, declining from 2.21 per cent to 2.12 per cent. </div>
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<div>The lowest rate of delinquency was to be found in the ACT at only 0.58 per cent (Canberra has <a href="http://petewargent.blogspot.co.uk/2017/11/drain-swamp" target="_blank">by far the highest incomes</a> on the country). </div>
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<div>In New South Wales 30-day arrears fell from 0.79 per cent to only 0.75 per cent in the month.</div>
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<div>Arrears were also below 1 per cent in Victoria and Tasmania.<br><br>Over the past year the biggest improvers were the southern states of Tasmania and South Australia (the other ex-mining state jurisdictions had low arrears already).<br><br><div><a href="https://2.bp.blogspot.com/-z4KH6mQAhPg/Wjg08TYwYLI/AAAAAAAAnk8/r_3IgizuDq8j_7_DPiwD5DC_iYSh_KyYwCLcBGAs/s1600/S%2526P%2BState.jpg" target="_blank"><img src="https://2.bp.blogspot.com/-z4KH6mQAhPg/Wjg08TYwYLI/AAAAAAAAnk8/r_3IgizuDq8j_7_DPiwD5DC_iYSh_KyYwCLcBGAs/s640/S%2526P%2BState.jpg" width="640" height="386" data-original-height="787" data-original-width="1302"></a></div>
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<div>As at the beginning of 2017, S&amp;P Global had reported:<br><br>"We believe that the risk of a sharp, disorderly correction in house prices remains relatively low, reflecting our stable economic outlook for Australia."<br><br>While risks remain, S&amp;P commented this month:</div>
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<div>"We do not expect arrears to increase much above current levels while benign economic conditions persist." </div>
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pwargent-M4siyDbqQY

Mortgage delinquencies decline further: Pete Wargent

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<p>Westpac's Q3 financial update saw their mortgage delinquencies soar by 55 basis points due to the COVID-19 pandemic.</p>
<p>Delinquencies over 30 days jumped from 188 bps to 243 bps over the three months to June.</p>
<p>There was an equally big jump in 90+ day delinquencies, up from 94 bps to 149 bps.</p>
<p>"Our approach to applying COVID-19 relief meant an increased number of customers entered hardship assistance", Westpac advised.</p>
<p> <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/8/18/Westpac%20delinquencies%20by%20state.jpg" alt=""></p>
<p>The big four bank provided 135,000 home loan customers with mortgage relief up to July 31, accounting for $51 billion of their $446 billion loan book.</p>
<p>64% of the mortgage holders seeking the relief were owner-occupiers, and 79 per cent were paying principal and interest repayments.</p>
<p>The mortgage deferrals primarily came from New South Wales and Victoria, who made up 70 per cent of all mortgages deferred.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/8/18/deferrals%20by%20state%20Westpac.jpg" alt=""></p>
<p>After checking in after three months of the extension, Westpac said that half were expected to return to payment, and the other half requested a further three month extension.</p>
<p>That leaves $30 billion still on pause.</p>
<p>Westpac's total loan portfolio shrunk a touch over the three months to June, down from $445.7 billion to $445.5 billion.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/8/18/Westpac%20loan%20book%20composition.jpg" alt=""></p>
<p>Owner-occupier numbers continued to grow, as investor loans continued their contraction, as did interest only loans, now below 22 per cent of Westpac's loan book.</p>
<p>More mortgage holders are now fixing their home loans, with record low rates on offer.</p>
<p>Although there's still no suggestion on the variable front that the RBA rates will hike rates for at least three years.</p>
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jrobinson-rf4aSBido9

Westpac's mortgage delinquencies jump due to COVID-19

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<p>In this economic environment, mortgage delinquencies will moderately increase, especially given that high household debt — which amounts to almost 190% of annual gross disposable income — will leave households financially vulnerable to economic and housing market shocks, according to Moody's Investor Service.</p>
<p>Moody's Investor Service foecast is for real GDP growth of 1.8% in 2020, lower than 2.0% in 2019. Unemployment will be relatively steady at 5.2% in 2020, from 5.1% in December 2019.1 </p>
<p>However, it is likely that most mortgage borrowers will be able to continue meeting their repayments at our forecast level of economic growth and unemployment, which means delinquencies will remain low overall.</p>
<p>Furthermore, historically low mortgage interest rates will support borrowers' abilities to repay mortgages.</p>
<p>In January 2020, month-on-month house prices in Sydney and Melbourne increased by 1.1% and 1.2% respectively.</p>
<p><strong>Converting IO mortgages to principal/interest loans will increase delinquencies</strong></p>
<p>The conversion of IO mortgages to principal and interest loans will cause some delinquencies in 2020, though this risk will diminish throughout the year. Banks originated a significant volume of IO loans in the first half of 2015. T</p>
<p>he five-year IO period for these mortgages will end in the first half of 2020. When such loans convert to principal and interest at the end of the IO period, borrowers must make higher monthly repayments, which can lead to delinquencies. </p>
<p>Such risks will diminish through 2020, given that IO lending declined from the second half 2015.</p>
<p><strong>Recent bushfires will have a negative but limited effect on RMBS performance</strong> </p>
<p>The 2019-2020 bushfires will have a negative but limited effect on RMBS performance.</p>
<p>They have largely affected homes in rural and regional areas across Australia, while most of the loans in RMBS we rate have the backing of underlying properties located in major cities.</p>
<p>In addition, general home insurance, government/lender relief measures, as well as low average loan-to-value (LTV) ratios will mitigate risks for RMBS, by either helping to limit mortgage delinquencies or preventing them escalating to defaults and losses.</p>
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j.ballantyne1990-6AQqhLzZaK

Delinquencies will moderately rise in 2020 but remain low: Moody’s Investors Service

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<p>The NAB has advised its mortgage delinquencies are on the rise.</p>
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<p><span>The ratio of 90+ days past due and gross impaired assets to gross loans and acceptances increased from 0.79% to 0.85%, largely due to rising Australian mortgage delinquencies, it advised today.</span></p>
<p>The bank said asset quality overall remained broadly sound.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/NAB%20arrears%20rise.jpg" alt=""></p>
<p>The acting chief Philip Chronican released its third quarter trading update this morning, reporting unaudited statutory net profits of A$1.70bn, and A$1.65bn in unaudited cash earnings – a 1% increase year-over-year.</p>
<p>Revenue also increased, as NAB continues to see robust growth in (SME) small business lending.</p>
<p>But Chronican noted there was a "backdrop of a challenging operating environment, including subdued home lending growth.</p>
<p>He advised the bank's 3Q19 performance compared with the 1H19 quarterly average was "solid," with revenue increasing and costs flat.</p>
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<p>Its seen a 27% reduction in over-the-counter transactions and an 18% reduction in call centre volumes.</p>
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NAB mortgage delinquencies on the rise

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<p>Australian RMBS delinquency rates, which rose slightly over the three months ended 31 March 2019, will continue to increase over coming quarters, according to the latest report from Moody's Analytics.</p>
<p>They believed arrears will rise because of high debt levels, the conversion of a large number of interest-only mortgages to principal and interest loans and declining house prices.</p>
<p>They suggested however that delinquency rates will only increase moderately, given stable GDP growth, low unemployment and recent interest rate cuts.</p>
<p>The 30+ day delinquency rate for prime Australian RMBS was 1.58% in March 2019, compared with 1.54% in December 2018 and 1.48% in March 2018.</p>
<p>For prime RMBS issued by major banks, the 30+ day delinquency rate was 1.75% in March 2019 compared with 1.72% in December 2018.</p>
<p>For regional banks, the delinquency rate was 1.65% in March 2019, unchanged from December 2018, while for prime RMBS issued by other authorised deposit-taking institutions, the delinquency rate was 0.54% in March 2019, compared with 0.50% in December 2018.</p>
<p>The 30+ day delinquency rate for non-conforming RMBS was 3.75% in March 2019, up from 3.23% in December 2018 and 3.05% in March 2018.</p>
<p>Alena Chen, Vice President of Moody’s said, "over coming quarters, we expect Australia's record-high household debt, which amounts to almost 200% of annual gross disposable income, will contribute to a moderate increase in delinquencies."</p>
<p>"Meanwhile, a large number of interest-only mortgages are due to convert to principal and interest loans by the end of 2020, which will cause some delinquencies over this period. Banks originated a significant volume of interest-only loans in 2014 and 2015," she said,</p>
<p>The five year interest-only period for these mortgages will end in 2019 and 2020.</p>
<p>When interest-only loans convert to principal and interest, borrowers have to make higher monthly repayments, which can lead to delinquencies.</p>
<p>Commonwealth Bank saw a rise in arrears in their <a href="https://www.urban.com.au/news/98512-cba-arrears-rise-but-home-loan-book-continues-to-grow-slowly" target="_blank">March quarter results</a>.</p>
<p>Banks have already started trying to limit a large impact of moving mortgage holders from interest only to P&amp;I.</p>
<p>This time last year ANZ had 26 percent of their loan book made up of IO loans. They <a href="https://www.urban.com.au/expert-insights/finance/98053-anz-s-home-loan-portfolio-shows-big-drop-in-interest-only-loan-borrowers" target="_blank">reduced that number to 18%</a> as of May.</p>
<p>NAB have an unhealthier <a href="https://www.urban.com.au/news/98117-nab-housing-lending-revenue-continues-to-drop-and-shareholders-pay-the-price" target="_blank">26% of their loan book</a> given to interest-only loans.</p>
<p>Chen said Moody's expect house price declines to lead to a moderate increase in mortgage delinquencies over coming quarters."</p>
<p>"House prices in Australia declined by an average of 7.3% in the 12 months to 30 May 2019, while in Sydney and Melbourne, prices declined by an average of 10.7% and 9.9% respectively."</p>
<p>"We expect prices to continue to decline moderately over the remainder of 2019." she said.</p>
<p>Mortgage delinquencies will only increase moderately, while defaults and losses will remain low, given that continued GDP growth, low unemployment and recent interest rate cuts will support borrowers' ability to meet their mortgage repayments.</p>
<p>Moody's Investor Service forecast's real GDP growth of around 2.5% in both 2019 and 2020.</p>
<p>Australia's unemployment rate was 5.2% in April 2019 and they expect it will remain relatively stable at 5.5% by the end of 2019 and 2020.</p>
<p>In early June, the Reserve Bank of Australia lowered the cash rate by 0.25 percentage point, which prompted most lenders to lower their floating-rate mortgage interest rates.</p>
<p>To see which banks decided to pass on the full rate cut, <a href="https://www.urban.com.au/expert-insights/finance/99726-what-are-the-latest-cuts-and-who-s-making-them" target="_blank">click here</a>.</p>
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Australian RMBS delinquency rates to keep rising: Moody's

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<p>Australian mortgage delinquencies, which increased over the year to November 2018, will continue to increase through 2019, according to Moody's Investors Service latest delinquency report.</p>
<p>"Mortgage delinquencies will continue to increase over 2019, because of high debt levels, subdued wage growth, the conversion of a large number of interest-only mortgages to principal-and-interest loans and declining house prices," says Alena Chen, a Moody's Vice President and Senior Analyst. </p>
<p>"However, delinquencies will remain low overall, given the rate of economic growth and low unemployment, which will continue to support borrowers' ability to meet their mortgage repayments," says Chen. </p>
<p><em><a href="https://www.propertyobserver.com.au/images/2019/4/3/moody%201.jpg" target="_blank">Click here </a>to enlarge</em></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/3/moody%201.jpg" alt=""></p>
<p>The proportion of Australian residential mortgages that were more than 30 days in arrears increased by 0.13 percentage point to 1.58% over the year to November 2018.</p>
<p>Mortgage delinquencies increased in New South Wales (NSW), Victoria, Western Australia, Tasmania, South Australia, Australian Capital Territory and Northern Territory over the year to November 2018, but declined in Queensland.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/3/moody%202.jpg" alt=""></p>
<p>In NSW, the delinquency rate increased to the highest in five years, though it remains relatively low compared with most other states and territories and NSW's long-term average.</p>
<p>Regions with exposure to the mining sector continued to dominate the list of areas with the highest delinquencies. </p>
<p>Moody's semi-annual delinquency map report provides a detailed analysis of the rate of residential mortgage arrears at a national, regional and postcode level in Australia. </p>
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Mortgage delinquencies set to continue rising through 2019: Moody's

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<p>Mortgage delinquencies and defaults are more likely to occur in outer suburbs of Australian cities than inner-city areas, according to Moody's Investor Service.</p>
<p>They suggest that this is because of the lower average incomes and weaker credit characteristics in these suburbs.</p>
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<p>On average across Australian cities, mortgage delinquency rates are lowest in areas within five kilometres of the CBD and highest in areas 30-40 kilometres from CBDs (below).</p>
<p>Moody's suggest this trend is likely to continue into the foreseeable future with little changing in way of incomes and credit characteristics.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/10/10/Moodys1.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/10/10/Moodys1.jpg" alt=""></p>
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<p><span>In most Australian capital cities, delinquency rates are highest in areas the furthest away from the CBD (below).</span></p>
<p><span>Sydney's delinquency rates grow steadily the further away from the CBD the property is, however in</span> Melbourne, Brisbane, Adelaide and Perth, delinquency rates in suburbs closest to the city centre are slightly higher than those a little further out.</p>
<p>This is due to the high share of mortgages on investment properties in areas closest to the city.</p>
<p>Within five kilometres of the Melbourne CBD, delinquent investment loans account for 57% of all mortgage delinquencies.</p>
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<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/10/10/moodys2.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/10/10/moodys2.jpg" alt=""></p>
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<p><span>Incomes and socioeconomic conditions are lower in outer suburbs, while credit characteristics are weaker.</span></p>
<p><span>Average incomes are lower in outer suburbs than in inner-city areas, while socioeconomic conditions are also typically weaker in outer areas. These factors increase the likelihood of mortgage delinquencies and defaults, particularly in the event of an economic downturn. </span></p>
<p><span>In all Australian capital cities, average incomes decline with distance from the CBD (below), a fact that reflects the higher proportion of people employed in low-skilled jobs in these areas.</span></p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/10/10/Moodys3.jpg" target="_blank">to enlarge.</a></p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/10/10/Moodys3.jpg" alt=""></span></p>
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Mortgage delinquencies are higher in city's outer suburbs: Moody's

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<p>Australian RMBS delinquency rates will rise moderately over coming quarters, with high debt levels and higher interest rates putting pressure on mortgage borrowers, according to the latest RMBS report from Moody's.</p>
<p>This is despite delinquency rates being broadly stable over the three months ended 30 June 2018.</p>
<p>The 30+ day delinquency rate for prime RMBS was 1.52% in June 2018, compared with 1.5% in March 2018 and 1.6% in June 2017.</p>
<p><img src="https://www.urban.com.au/images/2018/9/24/RMBS%20Moodys.JPG" alt=""></p>
<p>For prime RMBS issued by major banks, the 30+ day delinquency rate was 1.58% in June 2018 compared with 1.57% in March.</p>
<p>For regional banks, it remained flat at 1.99%, while for prime RMBS issued by other authorised deposit-taking institutions, the delinquency rate was 0.57% in June, compared with 0.51% in March.</p>
<p>The 30+ day delinquency rate for non-conforming RMBS was 3.16% in June 2018, compared with 3.05% in March 2018 and 3.41% in June 2017.</p>
<p>Moody's noted, "over coming quarters, we expect delinquencies to increases moderately, given Australia's record-high household debt, which amounts to 190% of annual gross disposable income."</p>
<p>High debt increases the risk of delinquencies, especially in a rising interest rate environment.</p>
<p>The report stated, "in late August and September, a number of Australia's major banks raised home loan interest rates, though we do not expect this round of rate rises to result in a significant increase in mortgage delinquencies, given that labour market conditions remain favourable and the rate increases were small compared with buffers built into home loan serviceability assessments."</p>
<p>A large number of interest-only mortgages are due to convert to principal and interest loans over the next two years, which will contribute to an increase in delinquencies over this period, according to Moody's data.</p>
<p>Banks originated a significant volume of interest-only loans in 2014 and 2015.</p>
<p>The five year interest-only period for these mortgages will end in 2019 and 2020.</p>
<p>The report also stated, "when interest-only loans convert to principal and interest, borrowers have to make higher monthly repayments, which can lead to delinquencies."</p>
<p>"On the positive side, economic and labour market conditions in Australia will continue to support borrowers’ ability to meet mortgage repayments over the next year, meaning that the increase in delinquencies will be moderate," they suggested.</p>
<p>Moody's forecasts real GDP growth of around 2.9% for calendar 2018 and 3% for 2019.</p>
<p>Australia's unemployment rate was 5.4% in June and we expect it will remain relatively stable at 5.6% by the end of 2018 and 5.5% at the end of 2019</p>
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Australian RMBS home loan delinquencies to rise moderately over 2018: Moody's

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<p>Lalor Park, Prestons and Casula have been ranked the suburbs with the most distressed listings in New South Wales.</p>
<p>Lalor Park ranked as the nation's most distressed suburb, according to Investar.</p>
<p>It suggests Lalor Park's has discounted listings which accounts for 60 per cent of the total.</p>
<p>The postcode 2147's house listings are typically for sale for 106 days.</p>
<p>The suburb's median house sits at $680,000, with 6.33 per cent growth over the past year.</p>
<p>Its median rent sits at $430 per week, with 2.38 per cent increase over the past year.</p>
<p>The rental yield sits at 3.3 per cent.</p>
<p>The Preston postcode 2170's house listings are typically for sale for 122 days.</p>
<p>The suburb's median house price sits at $880,000, which has grown by 2.3 per cent over the past year.</p>
<p>Its median rent sits at $650 per week, with 4.8 per cent growth over the past year.</p>
<p>The rental yield sits at 3.8 per cent. </p>
<p>The Casula postcode 2170's house listings are typically for sale for 175 days.</p>
<p>The suburb's median house price sits at $512,500, which has grown by 6.1 per cent over the past year.</p>
<p>Its median rent sits at $395 per week, with 1.3 per cent decrease over the past year.</p>
<p>The rental yield sits at 4 per cent. </p>
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Lalor Park, Prestons and Casula rank as the most distressed suburbs in New South Wales 

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<p>Six postcodes had zero mortgage delinquencies in November 2017, making them the best performing in the country.</p>
<p>Ten of the 20 best-performing postcodes in Australia were in Sydney, while six were in Melbourne.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/4/12/BEST%20POSTCODE.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/4/12/BEST%20POSTCODE.jpg" alt=""></p>
<p>Most best-performing postcodes were located in capital city regions where employment is concentrated in professional services.</p>
<p>The weighted average current loan to value ratios for the best performing regions were typically lower than the national average of 63.2%.</p>
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