Arrears on the rise as mortgage deferrals end – analysts

More people are falling behind on mortgage payments – and these are the suburbs where it's worst

Arrears on the rise as mortgage deferrals end – analysts

Mortgage arrears are beginning to rise as COVID-related relief measures get set to expire at the end of the month, according to market analysts.

S&P analytical manager Kate Thomson said low interest rates and a strong economic recovery had so far kept a lid on rising arrears, but that could be changing soon.

“We expect COVID-19-related arrears to more meaningfully surface beginning in the second quarter of 2021, following the expiration of mortgage-deferral periods in March 2021,” Thomson said. “Strong property market performance will also help existing borrowers by enhancing their equity positions in their homes, improving refinancing prospects.”

Spikes in arrears have been more pronounced in inner-city areas where population shifts have impacted rental incomes, according to a report by The Urban Developer.

Read more: Pay down your mortgage – NAB boss

According to S&P, the top 10 worst suburbs for mortgage arears are:

State

Suburb

Loans in arrears

Victoria

Altona East

6.14%

Western Australia

Forrestfield

5.58%

Western Australia

Byford

4.9%

New South Wales

Catherine Field

4.79%

Western Australia

Binduli

4.7%

Northern Territory

Darwin

4.67%

New South Wales

Guildford

4.55%

Western Australia

Cloverdale

4.49%

New South Wales

Bankstown

4.46%

Western Australia

Maddington

4.46%


Thomson told The Urban Developer that it was important to maintain prudent lending standards to mitigate the risks associated with increasing debt-to-income ratios where house-price growth outstrips wage growth.

According to the S&P, Victoria had the highest number of COVID-19 hardship mortgage deferrals, accounting for one-third of all deferrals in Australia. New South Wales followed with 32%, while Queensland came in third with 20% of the country’s COVID-19 mortgage deferrals.

LATEST NEWS