A slowing housing market and rising macroeconomic challenges will lead to an increase in Australian mortgage delinquencies in 2016, according to Moody's Investors Service.
According to Moody's latest monthly review of the performance of mortgages backing Australian prime residential mortgage-backed securities (RMBS), delinquencies in excess of 30 days rose to 1.20 per cent in November 2015 from 1.14 per cent in October 2015.
Moody's assistant vice-president and analyst Alena Chen said while the month-on-month increase in delinquencies in November is typical and reflects increased spending in the run-up to the holiday season, Moody's expects that mortgage delinquencies will be higher in 2016 than in 2015.
"The housing market has shown signs of cooling over recent months," Ms Chen said.
"Strong housing market activity in both Sydney and Melbourne helped foster relatively strong economic performance in the respective states of NSW and Victoria in 2015. But a slower pace of house price growth will mean a slowdown in economic activity and will contribute to a deterioration in mortgage performance in 2016 from current exceptionally healthy levels."
According to CoreLogic RP Data, in the fourth quarter of 2015 house prices fell by a weighted average of 1.36 per cent across Australian capital cities, with Sydney and Melbourne falling the most, at 2.27 per cent and 1.87 per cent respectively. Rental yields also dropped by 30 basis points in December 2015 compared with 12 months earlier.
Moody's expects the slowdown in the housing market to continue into 2016, particularly in Sydney and Melbourne where prices have increased significantly in the past two years.
"Slowing growth in China, Australia's biggest export market, and declining commodity prices, which are at or near multi-year lows, will also put pressure on the Australian economy and contribute to below-trend growth and a soft labour market in 2016," said Ms Chen.
Moody's findings concerning mortgage delinquencies are contained in its latest Global Structured Finance Collateral Performance Review report.
[Related: Mortgage arrears on the rise: S&P]