Mortgage Homeowners in arrears growing

Homeowners who bought during the property boom are almost twice as likely to fall behind in their mortgage repayments.
A six-monthly review by the Reserve Bank of Australia found there had been a "modest'' increase in the number of home loans three month in arrears. The greatest increase was seen in New South Wales where prices were highest and have fallen back, followed by South Australia, Victoria and Queensland.
Some of the blame was directed towards the big banks which were accused of relaxing lending criteria.

This however can be disputed on the grounds that the boom peaked three years ago, when lending was strictly that it is said to be today. The other variable is that many of the non conforming lenders have less strict guidelines than the banks, offering loans to borrowers with bad credit.

In fact the six-monthly review found new loans to buy property sourced three to four years ago - the top of the housing boom - had a higher rate of arrears than new loans in other times. Almost 30 per cent of Australians are paying off their home. "Borrowers that took out a loan in 2003 and 2004 are more likely to have bought at around the peak of the market,'' the RBA said. ``And with the higher level of interest rates, have had less opportunity to build up repayment buffers.'' The RBA said the introduction of "low-doc loans'' -- mortgages where the homeowner or home buyer has to provide little information -- had raised the risk of running into the red. "The higher arrears rate is hardly surprising given the general lowering of credit standards that has occurred since the mid 1990s,'' the report said.
The average loan is now $230,652 and the minimum repayment now consumes about 27.7 per cent of a household's income. That figure is lower than in 1989, when rates were 17 per cent, when 30.4 per cent of income had to be spent.
But Commsec chief economist Craig James said that while arrears rate had increased, it was still at an historic low. "The RBA acknowledges that household finances have been stretched by recent developments -- code words for higher interest rates and petrol prices,'' Mr James said. "The bank believes that balance sheets are in good shape, especially given that people have generally adopted a more cautious approach to their finances.''
Source: Herald Sun