one in 50 are in arrears (fairfax)

  1. 166 Posts.
    Well here is another interesting piece of information which reinforces the thesis that the market is on the way down.

    NSW households battling to pay mortgages on time
    Peter Martin
    June 15, 2011

    MORTGAGE repayments are deteriorating rapidly with as many as one in 50 NSW mortgage holders behind on payments.

    A survey by Fitch Ratings finds Fairfield-Liverpool the worst-performing region in the nation, having one in 35 mortgages at least a month overdue.

    The worst-performing postcode in the country is 2315 encompassing Nelson Bay, north of Newcastle, where one in 18 mortgages - 5.6 per cent - are at least a month overdue. NSW is home to five of the 10 worst-performing regions in the nation. Victoria is home to five of the 10 best.
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    The survey measures the performance of Australia's so-called securitised loans rather than those funded by deposits, meaning the 1 million mortgages examined over-represent those from smaller banks and non-bank lenders and under-represent those from the big four.

    It finds Queensland has overtaken NSW as Australia's worst performer after the floods but that conditions worsened in all states.

    In a separate report, JPMorgan blames the loans issued in 2009 after rates had been cut aggressively to fight the global financial crisis and the first homeowners' grant doubled.

    "We see clear potential for higher interest rates to drive arrears higher," the report says. "In particular, any further increase in interest rates would see the 2009 vintage loans exceed the affordability tests set at the time they were taken out."

    JPMorgan says mortgages issued or refinanced in 2009 make up 20 per cent of the total.

    The report's author, Scott Manning, said whereas, traditionally, unemployment had been the key driver of mortgage delinquencies, "the gearing up of households over the last decade has seen them become a lot more vulnerable to increases in the mortgage rate".

    The dramatic slide in the Reserve Bank of Australia's official cash rate from 7 per cent to 3 per cent between October 2008 and April 2009 "improved outcomes for borrowers when asking their mortgage providers how much they could borrow".

    "First home owners used the falling cash rate to increase the average amount borrowed by 25 per cent. First home owners were not alone in expanding their gearing."

    A Merrill Lynch, analyst Matthew Davison, said as the RBA tightened interest rates, house prices should fall by about 10 per cent from their peak of mid last year. His note to clients says: "Recent reports suggest this is occurring now."

    The most recent RP Data report found national capital city prices down 2.5 per cent in the year to April. Sydney prices were down 1.3 per cent.

    The Fitch Ratings survey identified a wide disparity in mortgage hardship within NSW, finding that, despite the state hosting five of the nation's 10 worst-performing regions, Sydney also hosts two of the 10 best - the lower north shore and eastern suburbs where less than 1 per cent of mortgage holders are behind on payments.

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