Australia’s mortgage delinquency rate to rise in coming quarters

It is beset with the same issues as of its peers: inflation and interest rates.

Australia’s mortgage delinquency rates are expected to increase moderately over the coming quarters, putting more burden on households, Moody’s Investors Service warned in a report.

Similar to its peers, the local mortgage market is impacted by rising interest rates and inflation globally, as well as declining house prices, mirroring problems faced by its peers in APAC, notably China.

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"We expect mortgage delinquency rates to increase moderately over coming quarters, because of rising interest rates, high inflation and declining house prices. Low unemployment, however, will mitigate delinquency risks," says Jason Tan, a Moody's Analyst.

The deterioration comes after the delinquency rate improved in the first quarter of the year. The over 30 days delinquency rate decreased slightly for Australian prime residential mortgage-backed securities (RMBS), although it increased for non-conforming RMBS.

Currently the issuance volume for Australian RMBS remained stable, totalling A$18.5b over the first six months of 2022, according to data from Moody’s. Non-bank financial institutions (NBFIs) issued the largest share, comprising 17 of the 23 RMBS deals in the first half of 2022.