Higher risk of mortgage defaults due to recent price surge, says report

Font size :
Sydney’s recent property boom has increased the risk of borrowers falling behind in their repayments, according to a report by Moody’s.

The report discovered that the city’s affordability took a sizeable hit after a 17.6% price growth in the past 12 months. This has increased the risk of borrowers defaulting on their loans, especially when the proportion of their household incomes set aside for mortgage repayments increased as well.

On a national scale, households comprised of two income earners would, on average, spend 29.3% of their monthly income on mortgage repayments as of October, higher than the 28.2% last year, according to the report.

Sydney, however, dropped to its lowest affordability level in 14 years, with households spending an average of 39.2% of their income for mortgage repayments, up from 2014’s 36.1%. Even new mortgage holders are being threatened by the rise in property prices.

 “The current low mortgage interest rates have failed to offset the impact of rising house prices over the past year, and the implementation of interest rate hikes [from lenders] this month will further increase delinquency and default risks for mortgage loans,” Moody’s analyst Natsumi Matsuda commented.

On the other hand, senior economist for Domain Group Andrew Wilson believes that the surge in house prices and its resulting increase in default risk was not a concern with Sydney’s relatively strong economy.

“Defaults still remain low and even though the risks have increased, the key is the economy and the fundamentals are still strong,” he was quoted as saying in Fairfax Media.
Wilson anticipates that mortgage defaults will remain at record low levels for the city.

Domain Group’s House Price Report for the month of September discovered that Sydney’s house price growth increased only by 3.2% over the quarter, its slowest result since March last year.



 

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

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

Saturday, Sep 23, 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?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords