More borrowers to fall behind on mortgage repayments when support measures end

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on March 16, 2021
More borrowers to fall behind on mortgage repayments when support measures end

A growing number of borrowers are expected to struggle to make their mortgage repayments, but surging house prices could curb this.

Credit rating agency Moody's has warned mortgage delinquency rates will rise in the first half of the year once mortgage relief measures taper off at the end of March and government support measures expire.

Mortgage arrears rates had been expected to rise in the December half of 2020, but a combination of record low interest rates and a stronger than expected economic recovery helped shield much of this.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 29, 2022. View disclaimer.

But with coronavirus government support measures and loan deferrals ending, Moody's expects mortgage delinquencies to rise as borrowers have to resume their repayments. 

This is despite the currently booming property market, which Moody's says could reduce some of the pain for borrowers.

"Rising house prices will curb mortgage delinquencies risks to some extent, because they will make it easier for borrowers in financial difficulty to sell their properties and repay loans," said Moody's Vice President and Senior Credit Officer Alana Chen. 

"But the positive influence of rising house prices will not be enough to prevent delinquency rates from increasing in the first half of 2021."

Moody's expects the situation to turn around in the latter half of the year.

"Towards the end of 2021, as the economic recovery gathers momentum, we expect the situation to turn around and for delinquency rates to improve."

Other analysts including Standard and Poor (S&P) agree.

S&P's recent Performance Index Australian prime mortgages shows mortgage arrears rose to 1.37% in December 2020 compared with 1.28% a year prior. 

S&P analytical manager Kate Thompson said mortgage arrears are expected to surge as loan deferrals expire.

“We expect Covid-19-related arrears to more meaningfully surface beginning in the second quarter of 2021, following the expiration of mortgage-deferral periods in March 2021,” Ms Thomson said.

“Strong property market performance will also help existing borrowers by enhancing their equity positions in their homes, improving their refinancing prospects.”


Photo by Pat Whelen on Unsplash

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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