Recent data from property investment firm Performance Property Advisory (PPA) revealed mortgage stress is on the rise due to a spike in defaults across three of the Big Four banks—Westpac, National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ).
According to PPA director David Macmillan, the number of home mortgages at least 90 days overdue has increased 15% to 25% in the past six months among the three banks.
“This is disappointing to see as the average loan to value ratio is down at the lowest point in 20 years and interest rates are at record lows with the RBA rate at 1.5 per cent, so we should be seeing more active homebuyers and less defaults in the marketplace right now,” he said.
“Despite low unemployment figures in Australia, the economy is clearly unhealthy in certain pockets, and if the rise in mortgage defaults continues on its current trajectory this will cause instability and volatility in some markets. We believe this is the time to be conservative and have genuine cash buffers,” Macmillan added.
However, he said the defaults level is “not a cause for concern right now.” Still, he noted that unemployment is likely to rise over the next few years due to a glut in the construction sector.
Further, he noted that the average mortgage is over four times the average income, the highest so far, and the rate is escalating at alarming levels.
“If this rate reaches five times the average income, this could cause vulnerability in the marketplace and become another barrier local buyers will need to overcome to make a property purchase,” Macmillan concluded.
Collections: Mortgage News