Mortgage delinquencies have remained low and stable in Australia’s current environment of low interest rates, robust house prices and low unemployment. Fitch’s Dinkum Index decreased in Q213, with improved 30+ days arrears of 1.39%, down from 1.48% in Q113. Fitch believes the performance of prime mortgages is unlikely to see further improvements, having reached a floor, and expects delinquency rates to rise slowly in the coming 12 months on marginally rising unemployment.
Self-employed borrowers, who are sensitive to cash flow volatility, have started to benefit from the low mortgage interest rate environment and improved housing market, with low-doc delinquencies reducing to 6.43%, from 7.57% in Q113.
Australia’s stable macroeconomic conditions continue to assist borrowers’ serviceability. Delinquencies rates remain low relative to other countries and within Fitch’s expectations.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
