Fewer Australians are falling behind in home loan repayments.
Stable employment levels and interest rates at record low levels have pushed prime housing loan arrears to their lowest level in seven years during September, according to Standard and Poor’s rating service.
During the month, the number of prime loans in delinquency slipped below 1 per cent for just the second time in almost a decade.
At the same time home owners at the bottom of the housing market showed signs of struggling to keep up with repayments.
“Subprime arrears rose across all categories, with the most significant movement occurring in the 31-60 days category,” Standard and Poor’s credit analyst Narelle Coneybeare said.
Subprime loans, which are also known as low-doc loans, now make up about 2 per cent of the Australian mortgage market. In the segment, arrears rose across all categories, with the most significant movement being in payments which are 31-60 days behind. By contrast, prime arrears decreased across every category.
“Despite the subprime arrears performance, we continue to believe that underlying conditions for borrowers remain stable, supported by low interest rates and generally stable employment conditions,” Ms Coneybeare said.
Across the home loan market, there are signs that delinquencies have reached their cyclical low, with major banks reporting flat to slight improvements in the number of home loans in arrears.
Commonwealth Bank’s home loan arrears for retail customers improved slightly during the September quarter. The total loan impairment expense was $198 million, down from $292 million in the June quarter. Australia’s largest mortgage insurer Genworth revealed 0.36 per cent of its mortgage portfolio is delinquent, down from highs of 0.53 per cent in 2012.