Mortgage arrears rates ease
Contrary to the popular narrative mortgage arrears rates have eased through 2024.
But why? Here are 4 likely reasons.
Firstly, it's partly due to dilution and strong new issuance, with home loan balances about 6 per cent higher than a year earlier in November 2024.
So while there is mortgage stress in some parts of the market, it's been somewhat masked in percentage terms by strong new lending.
Secondly, non-conforming loan arrears have been falling throughout 2024.
Things were starting to look a bit funky in this sector in 2022 and 2023, perhaps largely a function of these loans being a pandemic 'release valve', but lending standards these days are a lot more stringent than they used to be.
Thirdly, when mortgage arrears were relatively more elevated before 2020 this was mainly driven by high rates of arrears in Western Australia (resources downturn and recession) and Queensland (flooding).
But both of these states are now firing and their respective mortgage arrears rates have plummeted, and spectacularly so in the case of Western Australia.
Finally, we've lived through a period with the lowest rental vacancy rates on record - even lower than we saw in 2006 - at a time when the economy has been in full employment.
Thus, while some investors have chosen to sell up in Victoria, most landlords are managing just fine, and 30-plus day mortgage arrears rates for investment loans declined through 2024, to be under 1 per cent.
30-plus day arrears rates for owner-occupiers also eased through 2024, from around 1½ per cent to 1.3 per cent.
The wrap
Overall, the figures seem to suggest that, by and large, things are functioning as they should.
Tighter monetary policy has slowed consumer spending and building approvals - while wages price growth and inflation are also falling in lockstep - but despite some mortgage stress this hasn't led to an alarming or calamitous spike in arrears rates.
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