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.

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LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
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5.99% p.a.
5.90% p.a.
Principal & Interest
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6.14% p.a.
6.16% p.a.
Principal & Interest
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Important Information and Comparison Rate Warning

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. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. 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 . 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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