The proportion of Australian residential mortgages that were more than 30 days in arrears (30+ delinquency rate) increased to 1.62% in May 2017, the highest rate in five years. Higher delinquencies raise the risk of mortgage defaults and are therefore credit negative for Australian residential mortgage-backed securities (RMBS). Mortgage delinquencies increased to record highs in Western Australia, the Northern Territory and South Australia, and were also up in Queensland and the Australian Capital Territory (ACT) over the year to May 2017. Delinquencies declined in New South Wales (NSW) and Victoria, and fell slightly from record high levels in Tasmania. We expect mortgage delinquencies to continue to increase through the remainder of 2017. Weaker conditions in states reliant on the mining industry, high underemployment, and less favourable housing market and income dynamics will continue to drive delinquencies higher. Regions with exposure to the resource and mining sectors dominated the list of areas with the highest delinquencies in May 2017. Eight of the 10 regions with the highest 30+ delinquency rates were in either Western Australia or Queensland, and many of these regions are exposed to employment industries directly or indirectly related to mining and resources. The ten regions with the lowest mortgage delinquencies in Australia in May 2017 were all in Sydney and Melbourne, where housing market and economic conditions were the most supportive for mortgage borrowers.
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.
