Falling interest rates and stable house prices are helping to relieve the stress on Australians repaying their home loans, according to financial advisory site Mozo, but it's not all good news.
Fitch, a major rating agency, recently announced that the number of home loan borrowers falling behind on their repayments (30 plus days in arrears) had fallen to 1.36% in the third quarter of 2012, down 0.18% from the previous quarter.
Mozo says the drop is largely due to the RBA’s 125 basis point cuts in 2012.
However, according to Fitch, mortgages that are 90 days in the arrears are still at historical highs and self-employed borrowers are struggling.
Credit Suisse also released a report showing that the Australian housing market is marginally over supplied.
“Low demand due to high prices of property and other concerns amongst potential home buyers could cause pressure on the market in 2013.”
Mozo says home values are expected to increase as much as 5% in the next year, from less than 1% in the first 10 months of 2012.
However, not everyone agrees that there's a problem.
RBA governor Glenn Stevens says Australian house prices are high but, relative to other countries, are not over-priced.
“When you put it fully into international perspective… it’s actually a lot harder to make the case that we’re grossly over-priced and due for a crash. We’ve been around this level of house prices/incomes for 10 years.”
Stevens does say, however, that he would be concerned if there was another major rise in prices, such as increases of 10% to 20% seen in some recent years.
“We have seen some gain in house prices over the past year or so, which is reversing a little bit of an earlier decline. That doesn’t trouble me.
He says it would be troubling to see a return to 10-20% persistent rates of growth of housing prices, especially if that were accompanied by a return of rising leverage.
“I don’t think that’s going to happen, by the way.”