Home loan delinquencies to creep up: Moody’s

A new report from Moody’s has forecast that mortgage delinquencies will continue to increase this year after rising in every state.

Delinquency rates had crept up across each state and territory over the six months to May, according to a map published by Moody’s, with it tracking increases across 65 regions in Australia and declines in 22 regions.

Across the country, the proportion of mortgages that were more than 30 days in arrears was up by 0.17 percentage points from November 2020 to May this year, to 1.61 per cent.

The Northern Territory had seen the largest increase in delinquencies from November 2020 to May this year, up by 0.44 percentage points to a 2.7 per cent delinquency rate.

Victoria followed (up 0.25 percentage points to 1.66 per cent), as well as South Australia (0.21), Tasmania (up 0.18 percentage points to 1.01 per cent), NSW (up by 0.17 percentage points to 1.39 per cent) and Queensland (up by 0.12 points to 1.56 per cent).

The ACT and Western Australia had more minor changes, up by 0.09 percentage points to 0.75 per cent and 0.02 percentage points to 2.35 per cent respectively.

However, each state had declined year-on-year, with Western Australia showing the largest fall of 0.98 per cent.

The analysis also expects the climbing trend to continue in the months following eased restrictions across NSW, the ACT and Victoria.

“Economic conditions will improve as restrictions ease. Nevertheless, the adverse economic effects of this year’s outbreak will cause a moderate increase in mortgage delinquencies over coming months,” the report stated.

“Mortgage delinquency rates will only increase moderately over the rest of this year, because low mortgage interest rates, the strong housing market and various government and lender relief measures will support borrowers.”

Moody’s noted Victoria’s economy had contracted by 0.8 per cent in the first half of the year, reflecting the effects of the state’s COVID lockdowns prior to this year’s Delta outbreak.

All other states had grown, with the NT leading the pace (up by 6.2 per cent).

The 10 worst-performing regions for the highest delinquency rates featured rural and regional areas, as well as pockets within Perth, north-west Melbourne, Mackay and Darwin.

Western Australia (outback) ranked at the top, with its rate of 3.14 per cent, although it was down by 1.38 percentage points year-on-year.

Queensland (outback) had the same rate, which had grown by 0.68 percentage points.

Recent data from APRA showed COVID-related loan deferrals more than doubled between July and August, rising from $5.6 billion worth (0.3 per cent of loans outstanding) to $11.9 billion worth (0.5 per cent of loans outstanding).

Deferrals had been highest in NSW, at 1.4 per cent of outstanding loans.

Meanwhile, data from the Australian Banking Association in August showed almost 24,000 customers accessed hardship support from banks during the month following 8 July.

The total included around 15,000 repayment deferrals on home and business loans.

Hardship approvals and loan deferrals had been more skewed towards NSW residents in lockdown.

However, S&P reported in September that delinquency rates were better than expected, given the pandemic, and that refinancing had become a common way for borrowers to self-manage their way out of arrears.

[Related: NSW investor lending reaches record high: CBRE]