By Eleanore D. Sanchez
Recently released research revealed that there is a higher rate of unpaid home mortgages in regional Australia compared to the cities.
A Standard and Poor’s (S&P) study showed a general increase in unpaid home loans or arrears in all states and territories, except New South Wales, in the second quarter of the year. The spike was more pronounced in non-metropolitan areas, where arrears have grown from 1.24% to 1.77% in the last eight months.
According to S&P, this trend indicates that regional areas are more vulnerable to downturns in key industries, or employment trends.
Specifically, Western Australia posted the highest rate of unpaid mortgages at 1.95%, followed by Tasmania’s 1.62% rate, and South Australia, which clocked in a 1.56% level.
“The higher arrears in these states reflect, in part, the tougher economic conditions in these areas as evidenced by higher unemployment in South Australia and Tasmania. In the case of Western Australia, it reflects the ongoing impact of the slowdown in mining investment,” S&P explained in its report.
Furthermore, the ratings firm said: “Arrears generally start to drift lower in the second half of the year so we expect that arrears are likely to remain at low levels in most parts of the country over the next quarter. The rate cut by the Reserve Bank of Australia in August will also help.”
“Lower wage growth and higher household indebtedness are no doubt creating a degree of mortgage stress for some borrowers but we expect that relatively stable employment conditions and historically low interest rates will enable the majority of borrowers underlying RMBS transactions to stay on top of their mortgage repayments,” the report concluded.
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