New research reveals that Aussies are staying on top of their mortgage commitments, thanks to the strong housing market and low interest rates.
According to ratings agency Fitch's Dinkum RMBS Index, mortgage arrears remained stable in the second quarter of 2014 due to the intense competition in the mortgage market keeping interest rates at rock bottom.
The Index saw delinquencies for 30+ days rise by only 2 basis points, while the delinquency rate for 90+ days rose 3 basis points. Mortgage arrears were 18 basis points lower than at June 2013.
The low rate of arrears and strong housing market was also good news for lenders’ mortgage insurers, with only 34 LMI claims submitted this quarter. This is less than half of the 77 claims made in the first quarter.
The average claim amount of $46,878 this quarter was also well below the cumulative average LMI claim amount of $84,033.
However, even though the strong housing market is beneficial at the moment, the ratings agency warns of the long-term issues if house prices continue to rise.
“Rising house prices are beneficial to delinquencies and losses in the short-term, but sustained rapid rises could eventually have a negative effect on losses, especially for less seasoned loans with high loan-to-value ratios. Fitch believes the current yearly rate of growth is unsustainable in the long term if not coupled with an increase in household income,” Fitch said.