Mortgage stress grows as credit crunch deepens

New figures from the Reserve Bank of Australia reveal that the mortgage stress is hitting the suburbs hard.

New figures from the Reserve Bank of Australia reveal that the mortgage stress is hitting the suburbs hard.

The RBA’s Financial Stability Review, released yesterday, revealed that an estimated 17,000 borrowers are 90 or more days behind on their mortgage repayments, compared with around 15,000 borrowers earlier in the year.

The pain is being felt most in the western suburbs of Sydney, where the economic slowdown has been felt most sharply. Indeed, the rates of borrowers getting in arrears in western Sydney is double that in the rest of the city.

The outer Melbourne Hume region and the Perth area of Bunbury also have loan arrear rates above the national average.

Not surprisingly, the percentage of loans in arrears differs depending on the type of loan. The arrears rate for full-doc loans has increased only slightly to 0.5%, while the arrears rate for non-conforming loans – typically made to borrowers with poor credit histories – has jumped from 7.1% to 8.5% over the year to June 2008.

“It is, however, important to note that these loans account for less than 1% of the total value of outstanding housing loans in Australia,” the RBA says.

The bright spot for borrowers is that economists are widely tipping an interest rate cut before Chrristmas, perhaps even as early as next month. That should provide mortgagees with a bit of relief, provided the credit-squeezed banks actually pass the cut on.

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