Australian prime home-loan arrears stabilized in May after rising in preceding months, according to a recently published report by S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages was largely unchanged, declining to 1.52% in May from 1.53% a month earlier. Arrears in May were up 13 basis points year on year, though the deterioration dissipated in May.
Arrears fell across most of the country in May, with small declines in the key states of New South Wales and Victoria. Only Australian Capital Territory and Tasmania recorded increases. Arrears in Western Australia were at 3.00%, down 10 basis points from the previous month, and 3.10% in Northern Territory, down 23 basis points. Nonconforming arrears nationwide fell to 3.80% in May from 4.11% a month earlier.
We expect the stabilization in arrears to continue in the next quarter. Interest-rate and tax cuts will assist with debt serviceability, aided by the historical seasonality of arrears. We believe these factors will mainly affect the less-severe arrears categories and that borrowers who are deeper in arrears are more likely to struggle due to fewer refinancing options.
Major and regional banks are still rising. May is seasonally stronger period. Not a great report.