Falling yields to drive up mortgage delinquencies

Font size :
Declining rental yields have further increased the likelihood of an increase in Australian mortgage delinquencies over the next two years according to a global credit rating firm.

According to research from Moody’s Investor Services, poor yields, including record lows in Sydney and Melbourne, have made it more difficult for residential investors to service their loans.

“Deteriorating affordability increases the risks for Australian residential property investors and therefore for residential mortgage-backed securities backed by loans on investment properties,” JP Truijens, Moody's assistant vice president, said.

“The deteriorating affordability of servicing investment properties makes residential property investors more vulnerable to risks such as loss of income, interest rate increases, vacancies or rent reductions, and therefore increases their probability of default,” Truijens said.

It’s unlikely that yields will experience an uptick anytime soon; recent research from CoreLogic RP Data revealed that annual rental growth recently slipped into negative territory for the first time on record.

As yields have fallen in recent years, many investors have at least benefitted from strong rates of capital growth, but that too help defaults increase as affordability issues begin to appear.

“The decline in rental yields has increased the level of 'cashflow' losses suffered by residential property investors over the past three years and made investors dependent on greater levels of house price appreciation to cover their losses,” Moody’s Investor Services said.

“Deteriorating affordability also reduces investors' flexibility around refinancing or restructuring their mortgage loan terms, giving them less options should they experience hardship.”

According to Moody’s Investor Services, loans taken out during 2014 and 2015 will be the ones most affected. 

Did you use a broker for your last mortgage? Our sister title MPA wants your opinion on brokers – and you could win a $250 Coles Group & Myer gift card by giving them your views: click here to do the survey.

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Friday, Sep 22, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords