Regulators keep telling us that everything is OK and Australians are coping with surging mortgage repayments. But does the reality for many households match the soothing reports?
The Reserve Bank keeps telling us everything is OK, that Australia is still on the narrow path to conquering inflation without a recession and that most home owners are coping with higher interest rates.It's true Australia isn't in a technical recession — two consecutive quarters of a shrinking economy — but we've only narrowly avoided one through record population growth.
This is another reminder that Australia's economy was very weak — bordering on recession — before the pandemic started. At a recent property panel discussion, S&P Global's Erin Kitson — who is involved in putting credit ratings on residential mortgage-backed securities — said she was not expecting a major increase in arrears from current levels, largely because most people in trouble have been able to bail out before they get pushed."I think in this particular cycle, what has helped mortgage arrears has been the property price appreciation," she said.
It's perhaps no surprise then that the cohort of borrowers who took out their loans in 2022 — at the peak of the post-COVID property boom and at the beginning of the RBA's rate hike cycle — are most in arrears. Even if only the 2 percentage point gap to the previous record for quick turnover is due to voluntary forced sales, then that would be more than 12,000 borrowers who had to sell over the past year because they could no longer afford their loan.
"As lenders can face incentives to select certain types of loans for securitisation or ensure the performance of loans after issuance, the data may not be fully representative of all mortgages in the Australian market," it noted.
Home Loan Mortgage Debt Hardship Arrears Self-Securitisation Collateral RBA Reserve Bank Housing Real Estate Crash Default
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