Standard & Poor’s

Arrears on the way up as mortgage relief periods end

PHOTO: S&P’s Performance Index (SPIN)

Australian mortgage arrears are starting to rise as fiscal stimulus measures taper and mortgage relief periods end for many borrowers, according to new research.

According to Standard & Poor’s published RMBS Performance Watch: Australia report, the level of mortgage arrears has begun to rise, but economic recovery and lower interest rates are stoppering too much pain at this point in time.

According to S&P’s Performance Index (SPIN) for Australian prime mortgages — which measures the weighted average of arrears more than 30 days past due on residential mortgage loans in publicly and privately rated Australian RMBS transactions — the arrears index increased to 1.37 per cent in December 2020, compared with 1.28 per cent in the same period a year earlier.

While the index provider said that it expects that COVID-19-related arrears will “more meaningfully surface” from the second quarter of 2021, following the expiration of mortgage deferral periods in March 2021, it noted that arrears could rise at different rates for lenders, depending on restructuring arrangements and reporting nuances.

Just 1.4 per cent of total loans outstanding ($37 billion) remained on temporary deferrals as at 31 January, according to the most recent data from the prudential regulator.