Mortgage defaults improve, but highly geared borrowers vulnerable
by Your Mortgage Magazine (www.yourmortgage.com.au)
The number of mortgage arrears declined across Australiaduring 2009 thanks to record low interest rates and a resilient economy, according to a new survey.
The Fitch Ratings report on Australian Mortgage Delinquency by Postcode 30 September 2009 found that the rate of mortgage arrears longer than 30 days fell to 1.61% from 2.39% during the first quarter. The number of those who defaulted by more than 90 days also fell to 0.80% from 1.11% in January 2009.
NSW and WA remain the worst performing states at 1.9% mortgage arrears compared to the national average. The Gosford-Wyong region at 2.8% is the worst performing region in terms of the 30 day arrears, although even this region is substantially improved from just six months ago when it ranked as the third worst but had total 30+ days arrears by value of 3.8% according to Fitch.
Even though arrears have improved, performance remains variable based on postcode region or state, said Natasha Vojvodic, head of Australian Structured Finance at Fitch Ratings.
Improvement in affordability has been the biggest driver in the decrease in arrears and this becomes more apparent in these areas, such as western Sydney, will reverse and return to be amongst the worst performing.
Nelson Bay is the worst performing suburb with the value of mortgage defaults longer than 30 days at 9.3%. The number of borrowers defaulting on their mortgage repayments by more than 30 days also rose to 4.4%. Richmond in Sydney's northwest and Port Melbourne joined the worst performing postcodes in terms of mortgage performance after the number of mortgage arrears jumped to 4%.
There was a marked improvement in south west and western Sydney due to better affordability. However Fitch believes that the high gearing represented by high loan to value ratio (LVRs) remain a factor in western Sydney and that rising interest rates are likely to impact this part of the country more significantly than other parts going into 2010. The suburbs of St Marys, Guildford and Wetherill Park are seen to be particularly vulnerable.