Australian mortgage arrears rise to highest in 10 years

Borrowers may have been affected by inflation and interest rate hikes.

Australian mortgage arrears have hit their highest level in 10 years in the second quarter of 2024 as home prices rose to record highs, according to Fitch Ratings.

The 30+ day mortgage arrears rose 2 basis points (bp) to 1.31% in Q2, marking the seventh consecutive quarterly increase.

Early-stage arrears decreased 8bp to 0.40%, which indicates that arrears may start to plateau in the coming month. However, 30+ day non-conforming mortgage arrears rose to its highest level since the beginning of the COVID-19 pandemic in 2019.

“Higher arrears across both the conforming and non-conforming indices indicate that some borrowers are affected by persistent inflation and the 4.25 percentage point (ppt) hike in official interest rates since mid-2022,” Fitch said.

Australian home prices also rose to a new high during the quarter: 1.8% quarter-on-quarter, and 8.1% year-on-year. Prices have risen nationally since then and are up by 4.9% in the year to end-September 2024, according to Fitch.

Fitch expects prices to further rise by 4% and up to 6% in 2025 on the back of limited supply, a tight rental market, and high net migration.

Losses from the sale of collateral property should stay low, supported by strong home-price growth over previous years for most borrowers.

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