A growing number of households are falling behind in the mortgage payments as record indebtedness, rising interest rates and high petrol prices continue to bite.
Moody's Investors Services has found that 30-day delinquency levels in the fourth quarter of 2006 were on the rise, particularly in December, when seasonal factors such as Christmas spending depleted borrowers' pockets.
Moody's said the availability of "easy money" and a relaxation of lending rules had led to many households incurring high levels of debt that were out of line with their ability to repay.
Moody's analyst and author of the report, Philip Wong, said that as a result of high debt levels, borrowers were much more sensitive to adverse movements in the cost of living and debt repayments.
"While interest rates appear to be on hold in the near term, the full impact of the most recent rate rises of 0.25 per cent in November, 2006 has not yet been reflected in borrower behaviour," Mr Wong said.
He said the housing loan market remains fiercely competitive between banks and non-bank lenders who are introducing new products such as no-deposit finance to drive volume and market share.
"The current trend of increasing issuer risk appetite and relaxation of lending rules may increase future delinquency and loss rates, especially during economic stress," Mr Wong said in the report.
The report said that rapid growth of house values, where borrowers benefited from significant equity build-up in their properties, had come to an end.
It said that while there were spectacular rises in Western Australia, property prices on the eastern seaboard were flat.
"Furthermore, disparities can be observed within cities themselves, with increased levels of mortgagee repossession in troubled areas like southwestern Sydney but continued property appreciation in premium areas such as Sydney's north shore and eastern suburbs," the report said.
The chief executive of the Australian Banker's Association, David Bell, said the percentage of delinquent home loans for banks was at very low levels, particularly when compared with non-bank mortgage lending.
"The Moody's data shows that the delinquency performance of non-bank lenders' loans is much higher than for banks," Mr Bell said.
According to Moody's, non-conforming lenders' delinquency rate is 2.15 per cent for loans 30 days past due, while the banks' rate is 0.78 per cent.
"There is a large and growing segment of non-conforming lenders in the mortgage marketplace," Mr Bell said.
"They are not prudentially supervised and often need to act more quickly on a mortgage default than a bank."
He said if a customer could make payments on their loan they should speak to their bank as soon as possible.
"Generally, the bank will try to work out a solution, for example a different repayment schedule to accommodate temporary difficulties," Mr Bell said.
Source: AAP
