Mortgage arrears in rural Australia increased by 18% over the past 12 months and will continue to grow, says ratings agency
Mortgage arrears in rural Australia increased by 18% over the past 12 months and will continue to grow, says ratings agency
Mortgage arrears in rural Australia increased by 18% over the past 12 months, according to a new report by international ratings agency Standard & Poors. Over the same period arrears in metropolitan areas grew by just 2%, S&P found. Furthermore, the ratings agency warned that despite historically low interest rates “we expect the performance of arrears in capital cities and regional areas to continue to diverge; regional unemployment persists in many parts of the country, with no signs of abating.”
S&P looked at regional areas in New South Wales, Queensland and Victoria but not Western Australia, on the basis that those three states account for 80% of residential mortgage backed securities. It found that arrears were highest in Townsville (2.13%), Widebay (2.07%) and Cairns (1.55%), with regions geared to manufacturing and mining the most affected. Conversely, regional NSW had the lowest rate of arrears (0.89%) due to its more diversified local economies and coastal regional areas generally fared better overall.
Despite forecasting further rises in mortgage arrears, the report was adamant that the ratings for prime loan back residential securities would not be affected: “the majority of senior tranches of prime Australian RMBS transactions are unlikely to be impacted by rising arrears in regional areas given the credit support available to senior notes, relatively modest loan-to-value ratios and reasonable geographic diversity across most prime RMBS transactions.”
Mortgage arrears in rural Australia increased by 18% over the past 12 months, according to a new report by international ratings agency Standard & Poors. Over the same period arrears in metropolitan areas grew by just 2%, S&P found. Furthermore, the ratings agency warned that despite historically low interest rates “we expect the performance of arrears in capital cities and regional areas to continue to diverge; regional unemployment persists in many parts of the country, with no signs of abating.”
S&P looked at regional areas in New South Wales, Queensland and Victoria but not Western Australia, on the basis that those three states account for 80% of residential mortgage backed securities. It found that arrears were highest in Townsville (2.13%), Widebay (2.07%) and Cairns (1.55%), with regions geared to manufacturing and mining the most affected. Conversely, regional NSW had the lowest rate of arrears (0.89%) due to its more diversified local economies and coastal regional areas generally fared better overall.
Despite forecasting further rises in mortgage arrears, the report was adamant that the ratings for prime loan back residential securities would not be affected: “the majority of senior tranches of prime Australian RMBS transactions are unlikely to be impacted by rising arrears in regional areas given the credit support available to senior notes, relatively modest loan-to-value ratios and reasonable geographic diversity across most prime RMBS transactions.”
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