Australian Property News

Interest rates cause higher mortgage delinquencies but market remains strong

Posted on Wednesday, December 22 2010 at 1:18 PM

Mortgage defaults have risen across Australia this year, according to a new report from Fitch Ratings.

The delinquencies are being attributed to higher interest rates and a stabilisation in property prices.Mortgage stress is predicted to continue next year as interest rates keep rising, but report author James Zanesi says the overall amount of delinquencies won't disrupt the market and as long as employment remains high, defaults will stay in check.

"There's really no comparison with the Australian market and other markets such as Britain and the United States," Zanesi says.

"Their delinquencies are much, much higher than ours and for different reasons."

All six Australian states experienced rising delinquencies, with one per cent of borrowers one month or more behind their scheduled balance as of September 2010.

Overall 30-plus day delinquencies in Australia are now at 1.54 per cent, just less than the 1.56 per cent in March this year and higher than the 1.23 per cent in September 2009.

Delinquent borrowers tend to be in arrears on loans that are higher than average, according to the report.

Despite the rising delinquencies, Zanesi says the housing market will remain fairly strong, even with more interest rates to come.

"The market will continue to perform very well because the unemployment rate hasn't deteriorated so much," he says. "We've seen an improvement in employment this year and that will stay overall at low levels... which will mean delinquencies will be kept in check."

Delinquencies were the worst in Western Australia at 1.95 per cent and Queensland's Surfers Paradise was the worst performing postcode by value with 4.3 per cent of mortgage balances in arrears.

The top 10 worst regions by value were: