Mortgage arrears decline in September quarter, but NSW dominate list of struggling suburbs: Fitch report

Arrears in the Australian property market have improved over the year, with delinquencies falling to 1.42% in the September quarter, down from 1.77% in March, according to the latest research from Fitch Ratings.

The improvement comes as homeowners recover from the year’s natural disasters in January, Fitch says, while interest rates cuts should provide more scope for improvement in the first half of 2012.

Fitch Australia head of Australian structured finance Natasha Vojvodic told SmartCompany this morning areas stretched by higher property prices have benefited from stable interest rates.

“There haven’t been any interest rate rises, and they have really remained stable the entire year. This gives a lot of home owners the ability to adapt to mortgage repayments.”

Regions which have performed badly in the past have continued to show disappointing results, Fitch said. Fairfield-Liverpool is still the worst area in the country, while the Sydney south-western suburbs, the Gold Coast and Western Australia’s south-west region are all experiencing higher than average arrears.

However, overall arrears in these areas have decreased. In Fairfield-Liverpool, 30 day arrears fell from 2.99% to 2.63%, while in south-west Western Australia, they fell by 76 basis points to 2.17% – although Fitch says this is still above average.

Western Australia recorded the most improvement out of any state, with arrears falling from 1.99% to 1.5%.

“Regional employment has improved in Western Australia, which led to the rise. The mining sector has really expanded so it’s been easier for borrowers there to adapt.”

“The 30-60 day arrears have improved the most.”

Queensland has remained the worst performing state, although arrears are down from 2% to 1.7%. Victoria saw arrears fall to 1.04%, with most of those concentrated in the north-western part of Melbourne.

Based on loan amounts, Nelson Bay is the worst performing postcode with a delinquency rate of 7.1%. Other suburbs including Budgewoi, Casuarina and Helensvale still remain in the list of the worst performers.

Vojvodic says arrears are expected to increase in the New Year, but mostly as a result of Christmas spending, saying lower interest rates should provide homeowners with some relief.

“The usual Christmas and holiday spending flows through the first quarter of the year, and so going forward we expect arrears to increase, which is typical this time of year.”

“But during the first quarter the interest rate declines should offset some of that. As to the extent of that offset, it’s unknown.”

The 20 worst performing postcodes in Australia, by number:

1. Budgewoi, NSW 2262 – 3.5%
2. Nelson Bay, NSW 2315 – 3.1%
3. Kangaloon, NSW 2576 – 3.0%
4. Surfers Paradise, QLD 4217 – 29%
5. Cessnock, NSW 2325 – 2.6%
6. Plumpton, NSW 2761 – 2.6%
7. Kingston, QLD, 4114 – 2.5%
8. Helensvale, QLD 4212 – 2.5%
9. Crestmead/Marsden, QLD 4132 – 2.4%
10. Eagle Vale, NSW 2558 – 2.3%
11. Port Kennedy, WA 6172 – 2.3%
12. Gorokan, NSW 2263 -2.2%
13. Macquarie Fields, NSW 2564 – 2.2%
14. Taree, NSW 2430 – 2.2%
15. Hamlyn Terrace, NSW 2259 – 2.2%
16. Green Valley, NSW 2168 – 2.2%
17. Hoxton Park, NSW 2171 – 2.1%
18. Karuah/Swan Bay, NSW 2324 – 2.1%
19. Casuarina, WA 6167 – 2.1%
20. Ipswich, QLD 4305 – 2.1%