(Australian Associated Press)
The number of home loans in arrears is starting to go up despite low interest rates and stable levels of unemployment, ratings agency Standard & Poor’s says.
A report from S&P Global Ratings says mortgage delinquencies are up year on year, after historically low levels in 2014 and 2015.
“Arrears now have started to rise, even while interest rates remain low and the unemployment rate is relatively stable,” S&P Global Ratings said in a statement on Tuesday.
“While arrears remain below their peak and 10-year average, mortgage stress is apparent in parts of the country.”
With markets currently expecting increases in mortgage rates, S&P said home loan arrears were likely to go up again because most loans were on variable rates.
S&P said a total of 1.16 per cent of the mortgages underlying Australian prime residential mortgage-backed securities were more than 30 days in a arrears in October – up two basis points from September.
S&P said the rise was the first month-on-month increase in October since 2011, when arrears and interest rates were at higher levels.
Major banks experienced an increase in arrears to 1.14 per cent in October, from 1.11 per cent in September.
But regional banks experienced a decline in arrears to 1.85 per cent in October, from 1.87 per cent in September.
Loans from major banks that were longer than 90 days overdue accounted for more than 48 per cent of their total arrears in October – up from 40 per cent a year earlier.