A slowdown in house price growth coupled with sluggish economic conditions will result in an increase in mortgage delinquencies in Australia during 2016 according to one global credit rating firm.

According to Moody’s Investor Services, the proportion of Australian residential mortgages more than 30 days in arrears was 1.20% in November 2015, compared with 1.19% in November 2014, and that is expected to rise again in the coming year.

"We expect the Australia-wide delinquency rate for mortgages showing more than 30 days in arrears to increase in 2016, but remain at a low level," Moody’s assistant vice president and analyst Alana Chen said.

"We also expect that Australia's GDP growth will likely be towards the upper end of our 1.5% to 2.5% forecast range for 2016, but this will be below the long-term average of 3.5%. We believe this economic backdrop will prompt a slight increase in the Australia-wide mortgage delinquency rate in 2016," Chen said.

While Moody’s Investor Services is predicting a nation-wide increase in mortgage delinquencies in 2016, it won’t be spread evenly across Australia.

The ratings firm believes there will be further bad news for resource states; Western Australia, the Northern Territory, and to a lesser extent, Queensland, with the bulk of the increase in delinquencies to be found in those markets.

In Western Australia, the rate of mortgage holders more than 30 days in arrears rose by a significant 0.48% over the year to November 2015 to 1.71%, the highest mark in the country.

Though delinquencies will are predicted to rise in those states, performance in New South Wales will help to keep the nation-wide rate of delinquencies relatively low.

“With delinquencies in NSW remaining steady and those in other states set to continue to edge higher, we expect that the Australia-wide delinquency rate will increase slightly over 2016 but remain low," Chen said.

Moody’s Investor Services claims a slowdown in house price growth in NSW will be balanced out by the “positive effect of healthy economic and labour market conditions.”

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