New South Wales has Australia’s highest mortgage delinquency rates and the number will continue to rise, according to a Moody’s Investors Service report.
The fourth Trends in Australian RMBS Collateral: 2004 -2007 report shows that 12 of the 20 suburbs with the highest delinquency rates are in the Sydney area, with Liverpool, Parramatta and Canterbury taking the top three at 1.43%, 1.21% and 0.95% respectively.
The report analysed over a million loans and found that in December 2007, 0.66% of mortgage payments in NSW were 90 days overdue, compared to 0.14% in the ACT and 0.31% in Victoria. These rates were at record highs in the first quarter of 2008.
But Ilya Serov, senior analyst at Moody’s, says while the number of delinquencies are rising, they aren’t cause for major alarm.
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“Although we are seeing rises… I say they’re going up from a relatively low base in absolute numbers. So it’s a concern, but not an immediate concern,” he says.
Serov says the main reasons for the rises are “rising costs of living and interest rates, putting people under pressure. Also, there are pockets in the housing market. It’s uneven, so you have pockets of property price appreciation. Thirdly, it reflects the most risky lending of loans recently.”
The report also finds defaults were more likely to be found among borrowers with high loan to value ratios, limited documentation loans and non-documentation loans.
Additionally, the report finds economic growth in WA has led to the troubling rise of no-doc and low-doc loans, making up 28.8% of all mortgages in 2007. “It’s a cause of concern for us,” Serov says. “This is a concern; obviously you don’t want people to go into default.”
Serov warns these problems will not disappear. “We need some relief of inflationary pressure,” he says, “but we won’t see any of these rates reversing any time soon.”
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