Wednesday, June 15, 2011

How many mortgages are overdue?

Mortgage affordability is deteriorating rapidly with a new survey finding one in 80 Australian mortgage holders are behind by one or more repayments.

In disaster-ravaged Queensland the proportion of so-called delinquent mortgages shot up from 1.54 per cent to 2 per cent between November and March, meaning one in 50 Queensland mortgage holders was unable to pay on time.

The Fitch Ratings survey comes as Merrill Lynch forecasts a nationwide slide in house prices of 10 per cent from their mid 2010 peak.

Melbourne prices have already fallen 2.4 per cent since April 2010.

In a note to clients Merrill Lynch analyst Matthew Davison said prices would fall further as it became clear interest rates would climb with “recent reports suggesting this is occurring now”.

Victoria is the best performing state in the nation on the Fitch Ratings survey with a mortgage delinquency rate of just 1.34 per cent. It hosts five of the ten best performing regions in the nation and none of the ten worst.

NSW and Queensland dominate the worst performing regions and postcodes with the worst, Nelson Bay north of Newcastle having a delinquency rate of 5.6 per cent meaning one in 18 of its mortgages are overdue...

The rates remain low by United States and European standards and may overestimate deliwquent mortgages. The one million mortgages surveyed are those bundled and sold to investors rather those funded by deposits, meaning mortgages issued by Australia’s biggest banks are underrepresented.

A separately-released JP Morgan report blames the loans issued in 2009 after rates had been cut aggressively and the first home owners grant doubled to fight the global financial crisis.

The report’s author Scott Manning says the dramatic slide in official in the Reserve Bank’s cash rate from 7.00 per cent to 3.00 per cent between October 2008 and April 2009 “improved outcomes for borrowers when asking their mortgage providers how much they could borrow”.

“First home owners used the falling cash rate to increase the average amount borrowed by 25 per cent. They were not alone in expanding their gearing.”

Whereas traditionally unemployment has been the key driver of mortgage delinquencies “the gearing up of households over the last decade has seen them become a lot more vulnerable to increases in the mortgage rate”.

Bureau of Statistics figures released yesterday show lending for housing bounced in April, climbing 6 per cent after sliding for three consecutive months.

Reserve Bank figures showed the average credit card balance scarcely moved in April, climbing just $4.50 to $3326. The average balance is up just 2.9 per cent on a year ago – less than the rate of inflation. By contrast purchases made on debit cards were up 22 per cent .

“The new conservatism is no better illustrated than in the way that consumers prefer to pay for their goods,” said Commsec economist Craig James. “Purchases made on debit cards are growing well in excess of the pace of spending with credit cards.”


Australia’s 10 worst regions

Percentage of mortgage payments more than 30 days late

1 Logan City & Beaudesert QLD 2.10
2 Outer South Western Sydney NSW 1.98
3 Central Coast NSW 1.88
4 Blacktown NSW 1.86
5 Fairfield-Liverpool NSW 1.85
6 Caboolture Shire QLD 1.84
7 Gold Coast West QLD 1.83
8 Outer Western Sydney NSW 1.82
9 South West WA WA 1.78
10 Ipswich City QLD 1.78

Australia’s 10 best regions

1 Lower Northern Sydney NSW 0.85
2 Inner Melbourne VIC 0.87
3 Northern Middle Melbourne VIC 0.90
4 Moreland City VIC 0.97
5 Boroondara City VIC 0.98
6 Eastern Suburbs NSW 0.99
7 Australian Capital Territory 1.03
8 Eastern Middle Melbourne VIC 1.04
9 Northern Territory 1.04
10 Northwest Inner Brisbane QLD 1.05

Fitch Ratings

Published in today's SMH and Age

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