The number of borrowers in Australia who are behind by one month or more in their mortgage payment has increased considerably in the 12 months to September, according to research released by Fitch Ratings
The agency said one percent of borrowers were a month or more behind in their scheduled payments, and the number was double in the western part of the country, driven by increasing unemployment.
“May just be life events like divorce and illness but the key driver is unemployment and also potentially over-commitment by individual borrowers and then when they’re over-committed, interest rates increasing probably hurt them and if they’re at the edge that might push them over into arrears,” said David Carroll, author of the report released by Fitch Ratings.
While mortgage stress is an issue in Western Australia, Sydney recorded the highest delinquency rates, with 2.8 percent of total mortgagees behind in payments.
Blacktown has also recorded the largest increase in missed payments, and ranked fourth in the country, behind New South Wales Central Coast, with 2.7 percent of total borrowers more than a month behind in mortgage payments.
David said the situation could worsen if the Reserve Bank of Australia increases interest rates in 2011, as predicted by several economists.
“There’s a perception that interest rates will rise during 2011 and on top of the interest rate increase we’ve had over the 18 months,” said Mr. Carroll. “I think you’ll find that there’ll be more people out there who are on the edge, will be tipped over potentially and be forced into arrears.”