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Mortgage default rates rise.

Mortgage defaults have risen across Australia this year due to higher interest rates and a stabilisation in property prices, according to a recently released report from ratings company Fitch in its RMBS Australia Special Report.

Mortgage stress is predicted to continue next year as interest rates keep rising, but report author James Zanesi says the overall amount of delinquencies won’t disrupt the market and as long as employment remains high, defaults will stay in check.

Home-loan delinquency has hit a record high in Western Australia, despite the state’s booming economy.

It is the first time the state has finished last in the property data, released by ratings company Fitch in and reported in WA Today that has branded West Australians the worst performers in Australia when it comes to repaying their mortgages.

“For the first time in the history of this report, Western Australia is the worst performing state in terms of 30+ day arrears (1.95 per cent),” the report said.

The Australian Capital Territory continues to be the best-performing state, with a delinquency ratio of 0.71 per cent.

Australia’s worst postcode was Nelson Bay, NSW, which exceeded all other areas with a delinquency rate at 8 per cent and Surfers Paradise was the worst performing postcode by value with 4.3 per cent of mortgage balances in arrears.

Having said that Zanesi says: “There’s really no comparison with the Australian market and other markets such as Britain and the United States,”

“Their delinquencies are much, much higher than ours and for different reasons.”

All six Australian states experienced rising delinquencies, with one per cent of borrowers one month or more behind their scheduled balance as of September 2010.

Overall 30-plus day delinquencies in Australia are now at 1.54 per cent, just less than the 1.56 per cent in March this year and higher than the 1.23 per cent in September 2009.

Delinquent borrowers tend to be in arrears on loans that are higher than average, according to the report.

Despite the rising delinquencies, Zanesi says the housing market will remain fairly strong, even with more interest rates to come.

“The market will continue to perform very well because the unemployment rate hasn’t deteriorated so much,” he says. “We’ve seen an improvement in employment this year and that will stay overall at low levels… which will mean delinquencies will be kept in check.”

The top 10 worst regions by value were:

  1. Fairfield-Liverpool, NSW (2.81%)
  2. Southwest WA, WA (2.8%)
  3. Central Coast Sydney, NSW (2.74%)
  4. Blacktown, NSW (2.65%)
  5. Outer western Sydney, NSW (2.56%)
  6. Outer southwestern Sydney, NSW (2.42%)
  7. Gold Coast east, Queensland (2.26%)
  8. Hunter, NSW (2.08%)
  9. Southwest metropolitan Perth, WA (2.07%)
  10. East metropolitan Perth, WA (2.03%)


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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