More than 25,000 Australian households are currently estimated to be 90 or more days in mortgage arrears, 2,000 more than this time last year.
The Reserve Bank of Australia’s biannual Financial Stability Review, released yesterday, showed that NSW led the pack in terms of housing arrears, with Western Australia not far behind.
The resource state is playing catch up with NSW, as softening property prices and a pullback in mining activity causes defaults to rise.
According to the RBA’s review, the changes in the housing finance market over the past 10–20 years, such as the increased availability of low-documentation and non-conforming loans, and a wider range of lenders, have meant that a greater amount of credit has been more readily available to households.
As well, there has been an increase in the share of households borrowing for a longer duration, or for investment and other purposes, compared with earlier periods.
“The increase in the share of households in arrears over the last few years partly reflects these higher debt levels. Arrears rates are also likely to have been affected by movements in interest rates,” the review said.
“The arrears rate on (securitised) variable-rate loans increased 35 basis points over the 12 months to December 2008, and has since declined by 20 basis points; this compares to an increase of 10 basis points for fixed-rate loan arrears over the same period, with no subsequent decline.”
More recently the slowing labour market has contributed to higher arrears rates, with liaison with lenders suggesting that reductions in overtime and working hours have caused difficulties for some borrowers.