The proportion of borrowers falling behind on their mortgage repayments has worsened following the most aggressive rate hikes in a generation – with more bad news expected.
CoreLogic’s research director Tim Lawless said mortgage arrears, where a borrower was at least 30 days behind on their repayments, was likely to get even worse as higher interest rates pushed up unemployment.
‘It’s likely mortgage arrears will rise further as unemployment lifts, household savings deplete further and, more broadly, economic conditions navigate a period of weakness,’ he said.
The proportion of borrowers falling behind on their mortgage repayments has worsened following the most aggressive rate hikes in a generation – with more bad news expected
New CoreLogic data showed 1.6 per cent of borrowers were behind on their repayments in the March quarter of 2024 – with more than half the stressed mortgage holders in this group more than 90 days overdue.
That is a big increase from just 1 per cent in the September quarter of 2022, back when the Reserve Bank had raised rates five times.
The RBA has now raised rates 13 times, to a 12-year high of 4.35 per cent, as part of the most aggressive monetary policy tightening since the late 1980s.
The Reserve Bank isn’t expecting inflation to fall back within its 2 to 3 per cent target until December 2025.
But that would mean more than 44,000 people losing their job, with unemployment forecast to rise to 4.3 per cent by then, up from 4 per cent in May.
Still, Mr Lawless said unemployment would have to be much higher for mortgage arrears rates to soar.
Reserve Bank Governor Michele Bullock hinted she was worried about higher unemployment making it harder for borrowers to service their mortgage
‘Arrears are unlikely to experience a material “blow out” unless labour markets weaken substantially more than forecast,’ he said.
Reserve Bank Governor Michele Bullock has hinted she was worried about higher unemployment making it harder for borrowers to service their mortgage.
‘People having jobs is critical to them being able to meet the challenges of the higher cost of living,’ she told reporters on Tuesday.
The RBA this week left interest rates on hold but Ms Bullock confirmed the board had considered a rate hike, but not a rate cut.
‘Yes, the board did discuss the case for increasing interest rates at this meeting,’ she said.
‘No, the case for a cut was not considered.’
