Mortgage delinquencies rise in first quarter: the nation’s worst-performing postcodes revealed

Mortgage delinquency rates have continued to increase despite several drops in the official interest rate, with arrears now set to return to a more “normal”, long-term rate, according to a new report from Fitch Ratings.

The result is surprising, even for Fitch director James Zanesi, who told SmartCompany this morning the result is not normally what the organisation would have expected.

“We simply believe this is a return to average,” he says.

The Fitch report found in the first quarter of 2013 the delinquency rate across Australia increased to 1.45%, up from 1.2% by the end of September 2012.

However, this is still below the five-year average of 1.53%. Zanesi simply believes the higher rate is a sign the market is returning to its long-term average rates.

“It’s unlikely that delinquency rates could go much lower. Even with interest rates so low, we’re still going to have a certain amount of delinquencies.”

The largest increases in arrears were found in Sydney’s southwest, Melbourne’s west and the south of Brisbane, which recorded above-average increases in delinquency rates.

The report also found delinquency rates were left unchanged in the most affluent regions, such as lower northern Sydney, southwest inner Brisbane and central metropolitan Perth.

However, it’s hard to determine what exactly made arrears increase in the first quarter of the year.

“Christmas spending and the increasing cost of living might have arguably offset the positive benefits from lower mortgage rates, but do not fully justify the increase in delinquency rates,” the report stated.

“The increasing number of delinquent borrowers in low-income and high-unemployment regions might indicate that these specific serviceability constraints cannot be fully solved by monetary policy, unlike previous first quarters characterised by rate cuts.”

Zanesi says the rise in delinquencies was a surprise, and to some extent, is not necessarily able to be pinned one specific event or trend.

“It could be argued that increased costs of living might be one reason, but it’s our view that can’t explain the entire rise.”

But given such high employment rates in Australia, high wages and low interest rates, Zanesi says the rates are still under control.

“This is more of a return to normal.”

The worst 20 performing postcodes

(By value, percentage of 30+ day arrears)
1. 2315 – Nelson Bay, NSW (6.6%)
2. 7010 – Montrose, TAS (5%)
3. 2262 – Budgewoi, NSW (4.4%)
4. 2325 – Cessnock, NSW (4.2%)
5. 3047 – Dallas, VIC (4.2%)
6. 4114 – Kingston, QLD (3.8%)
7. 6109 – Maddington, WA (3.5%)
8. 2558 – Eagle Vale, NSW (3.5%)
9. 2164 – Smithfield, NSW (3.5%)
10. 4217 – Surfers Paradise, QLD (3.4%)
11. 2171 – Hoxton Park, NSW (3.4%)
12. 4133 – Waterford, QLD (3.4%)
13. 2641 – Lavington, NSW (3.4%)
14. 2575 – High Range, NSW (3.3%)
15. 2168 – Green Valley, NSW (3.3%)
16. 2753 – Richmond, NSW (3.3%)
17. 2766 – Rooty Hill, NSW (3.2%)S
18. 5112 – Elizabeth, SA (3.1%)
19. 2176 – Bossley Park, NSW (3.1%)
20. 2161 – Guildford, NSW (3%)

 

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