Credit rating agency Moody's released data into mortgage delinquencies and revealed Perth suburbs make up eight of the top ten postcodes for 30-days-plus arrears.
Victoria's mortgage delinquency rate is the highest it's been since 2005, and in New South Wales the highest since 2013, while Western Australia took out top spot overall with a rate of 3.33%.
For suburbs, Ballajura (6066) in Perth's North-East has a mortgage delinquency rate of 7.13% as of May 2020.
The only non-Perth areas in the top ten are Ashcroft (2168) in Sydney's South-West in second place at 5.82%, and Australind (6233) in Bunbury, WA in tenth spot at 4.38%.
In the top 20 postcodes for mortgage delinquencies (i.e. behind on payments by 30 days or more), 16 are Western Australian, and all have delinquency rates 4% or higher.
By contrast, just one Perth suburb is a top-20 performer - Floreat (6014) in Inner-Perth at 0.58%.
The worst-performing suburb with the biggest uptick in delinquencies compared to May 2019 is Bayswater (6053) in Perth's North-east, up 2.26 percentage points.
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Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
Meanwhile, the bulk of the top-performing postcodes are in Sydney and Melbourne, while Holland Park and Chelmer (4068) in Brisbane are the two best performers overall, with delinquency rates of just 0.18% and 0.15% respectively.
Australia-wide, the delinquency rate is 1.99%, and Moody's predicts this to increase in the coming months.
"Mortgage delinquency rates will continue to increase over the next year, given the ongoing economic fallout from the coronavirus," Moody's Investors Services vice president Alena Chen said.
"Economic conditions will remain uncertain, driving delinquencies higher. The economic recovery will be tenuous over the next year, with labour and housing markets remaining soft and government and lender support measures ending.
"Over the next year, mortgage delinquency risks will be high in regions with large economic and labour market dependence on industries such as tourism, hospitality and retail, which have been hit hard by coronavirus disruptions."
Moody's Investors Services' report also said household incomes will come under pressure when JobKeeper and the increased rate of JobSeeker end next year.
What's the bigger picture?
Mortgages coming off deferral can be considered 'delinquent', and half have resumed payments as of October.
Excess delinquencies can affect credit at the wholesale level, and investors' appetite in the mortgage-backed securities (RMBS) space.
Statistics as of August indicate 5-10% of loans in 'prime' RMBS portfolios are deferred, while 'non-conforming' i.e. sub-prime, that figure is 10-20%.
Poor investments can lead to credit freezes, which can impact the availability of home loans to new borrowers - similar to what was seen during the Global Financial Crisis.
However, compared to the United States during the GFC, delinquency rates are incredibly low.
Moody's-rated default rates in the US during the crisis (typical defaults are mortgages delinquent by nine months or more) hit 9.7%.
Standard and Poor's-rated default rates hit nearly 13%.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*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.
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