More borrowers are expected to end the year with delayed mortgage repayments, according to the recent report from Moody's Investors Service.
The report showed an increase in mortgage delinquencies over the six months to May 2021, which is expected to continue for the rest of the year due to the economic after-effects of the coronavirus resurgence.
During the period, the share of residential mortgages that was more than 30 days in arrears was 1.61%, up from 1.44% in November 2020.
Delinquency rates increased in all states and territories, as well as in capital cities and most of rest of the state regions.
Mortgage Delinquency Rates – May 2021 |
|||
State/Territory |
May 2020 |
Nov 2020 |
May 2021 |
|
WA |
3.33% |
2.33% |
2.35% |
|
NT |
2.71% |
1.73% |
2.17% |
|
SA |
2.17% |
1.51% |
1.72% |
|
VIC |
1.85% |
1.41% |
1.66% |
|
QLD |
1.94% |
1.44% |
1.56% |
|
NSW |
1.71% |
1.22% |
1.39% |
|
TAS |
1.28% |
0.83% |
1.01% |
|
ACT |
1.21% |
0.66% |
0.75% |
|
Australia |
1.99% |
1.44% |
1.61% |
Source: Moody’s Investors Service
The biggest share of delinquent mortgages during the period was recorded by Western Australia at 2.35%, followed by the Northern Territory (2.17%).
Meanwhile, only the Rest of the Western Australia and Rest of South Australia regions posted a decrease in the share of mortgage in arrears.
Moody's Investors Service vice president and senior credit officer Alena Chen said delinquency rates are poised to increase for the rest of the year due to the restrictions imposed when the Delta variant hit the states of Victoria and New South Wales.
"The outbreak of the highly contagious Delta strain of the coronavirus since June and associated social restrictions, particularly in NSW and Victoria, have hampered economic activity through the third quarter," she said.
While NSW and Victoria are on track to achieving their vaccination rates to reopen, Ms Chen said a moderate increase in mortgage arrears is still expected.
Divergence among states and territories
Ms Chen said the states' uneven economic recovery and differing pathways out of coronavirus restrictions will result in further divergence in delinquency rates.
Victoria seemed to be the hardest hit, as reflected by the contraction in its economy over the year to June
"For other states, this year’s coronavirus outbreaks have been small in comparison with NSW and Victoria and there have been fewer restrictions and economic disruptions," she said.
"Lagging vaccination rates and in some cases, a cautious approach to removing state border restrictions, will likely delay full economic reopening beyond the schedule set by NSW and Victoria."
"Each states’ success on their pathway out of coronavirus restrictions will influence the pace of economic recovery over the next year and the outlook for mortgage delinquencies in different regions."
Five of the 10 regions with the lowest share of mortgage in arrears were from NSW, with Sydney's Northern Beaches achieving the lowest rate at 0.56%.
On the other hand, Western Australia took five spots in the 10 worst-performing regions.
Interestingly, one Victorian region — Melbourne - North West — joined the list, with a delinquency rate of 2.39%.
—
Photo by Emil Kalibradov on Unsplash
Collections: Mortgage News
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