06 Jun Mortgage Arrears Get More Severe
The latest data from S&P Global Ratings using their Mortgage Performance Index (SPIN) to March 2018 shows a rise in arrears, and significantly a hike in 90+ defaults. WA and NT continue their upward trends.
Here is the S&P chart, with the value of securitised mortgages in the pools falling. Overall defaults increased to 1.18% in March from 1.16% in February.
Arrears more than 90 days past due made up around 60% of total arrears in March 2018, up from 34% a decade earlier. This shift partly reflects a change in the reporting of arrears for loans in hardship that came in response to regulatory guidelines. Even accounting for this, however, there has been a persistent rise in this arrears category, though the level of arrears overall remains low.
Arrears movements were mixed nationwide. Home loan delinquencies fell in New South Wales, Queensland, South Australia, and the Australian Capital Territory in March. Of note, mortgage arrears in South Australia appear to have turned a corner; the state’s March 2018 arrears of 1.35% are well down from a peak of 1.81% in January 2017. This reflects a general improvement in economic conditions in South Australia, in line with national trends. Western Australia remained the state with the nation’s highest arrears, sitting at 2.37% in March.
The trends clearly show persistent issues in WA, which chimes with the recent bank disclosures. The question is of course whether we will see defaults rising in other states as lending standards are tightened.
And I recall Wayne Byers recent comment to the effect that at these low interest rates, defaults should be lower!