This article is from the Australian Property Journal archive
THE value of home loans in arrears rose for the seventh consecutive quarter, hitting $14.88 billion after rising 66.3% since before the Reserve Bank of Australia’s rate hiking cycle began.
According to the latest Australian Prudential Regulation Authority (APRA) Quarterly ADI Property Exposure statistics data for the June quarter, the value of home loans in arrears by 30 to 89 days was up 1.38% or $202.1 million over the period.
While this is only a marginal increase on the March quarter, the current value is up $5.93 billion on March 2022 figures.
It currently sits at 0.66% of all credit outstanding, which is still below the average in the year before COVID, at 0.73%
With the share of non-performing loans in 2019 at 0.91% on average, while it now sits at 1.03%, after six consecutive quarters of increases.
Meanwhile the value of mortgages in arrears by 90 days or more is now at $23.37 billion, with this category representing 1.03% of all mortgages after seeing six consecutive increases.
“It’s concerning but by no means surprising to see the total value of mortgages in arrears continuing to climb,” said Sally Tindall, data insights director at Canstar.
“After more than two years of soaring mortgage rates, many borrowers’ budgets have been stretched to the very last dollar, while others have gone firmly into the negative.”
Owner-occupiers remain over-represented in arrears data, with non-performing owner-occupier loans is now 1.07% of all owner-occupier loans on the books of all ADIs and investors representing 0.86%.
“What’s astounding is that at 1.03 per cent of all mortgages, the value of non-performing loans is not double or triple this figure after 4.25 percentage points of cash rate rises,” added Tindall.
“Owner-occupiers are more likely to fall into arrears than investors because they have fewer levers to pull to get relief. They don’t have tenants to ask for more rent and the prospect of selling up isn’t as straightforward.
Money in offset accounts has fell by $6.14 billion or 2.3% to $265.58 billion, which is still $37.53 billion above March 2022 levels.
“Australians might have raided their offset accounts in the June quarter, however, we expect the total amount in offset accounts will bounce back in the September quarter,” said Tindall.
“While millions of people have their backs up against the wall financially, many borrowers will put savings from the stage three tax cuts, the electricity bill relief program and their personal income tax returns into their offset accounts or straight into their home loan to alleviate at least some of the burden caused by higher interest rates.’’
At the same time, the share of new loans with a loan-to-value ratio (LVR) of 80% or more was up and to 31.9% for the quarter, up from the recent low of 28.7% in the September quarter.
While $7.55 billion new residential mortgages were processed as exceptions to serviceability in the June 2024 quarter, up 82% over 12 months.
The value of interest-only loans was up by $3.0 billion, though as a share of all term loans outstanding it sits at just 10.8%.
“Some Australians saddled with mortgages are struggling to keep up with the repayments, as more households fall into arrears,” said Laine Gordon, money editor at RateCity.
“Despite record high levels of savings in the bank, some families are dipping into their offset stash to keep up with rising cost of living pressures.”
