There are six suburbs where the delinquency rate on mortgages is zero – that is, no one is behind on their home loans.
Well, that is not completely true. There are half a dozen suburbs around Australia where none of the mortgages captured in Moody’s sample are 30 days or more behind on repayments.
But it is not a small sample, covering $125 billion of mortgages across 2400 postcodes, or about 8 per cent of Australia’s outstanding home loan debt.
The Australians most on top of their mortgages live in Carlingford, Crows Nest and Mosman in Sydney, Bentleigh and Glen Iris in Melbourne and Ormiston in Brisbane.
Darlinghurst is worth an honourable mention, having the only other arrears rate below 0.1 per cent (at 0.02).
Delinquent Queenslanders lead the list
It is a very different story up north and out west.
The nation’s highest delinquency rate of 4.95 per cent is in the Gladstone suburb of Barney Point, in central northern Queensland – that means one in every 20 households with a mortgage there find themselves in danger of defaulting and losing their home.
Gladstone is a town that was boosted by the construction of several giant LNG export terminals, but as the projects were finished the jobs have dried up, and with them the demand for houses.
Second on the list is Alpurrurulam with an arrears rate of 4.31 per cent. It is a tiny town on the Northern Territory-Queensland border, not too far (by outback standards) from the mining centre of Mount Isa.
The next three postcodes on the list are all suburbs in northern Perth, with between 3.69 and 4 per cent of borrowers behind on their home loans.
Every region in the top 10 was in Queensland or Western Australia, in areas that have been affected by the resources investment downturn and resultant home price falls.
You have to go to 12th place on the list to get out of those states, with Albion in Melbourne’s west, and Driffield in the Latrobe Valley – just down the road from the recently closed Hazelwood power station – in 13th.
Rising house prices give borrowers bailout options
There is only one NSW suburb in the top 20 – Erskine Park in Sydney’s outer west, where 2.9 per cent of borrowers are 30 days or more behind on repayments.
“Eight of the 10 regions with the lowest mortgage delinquency rates in November 2017 were in NSW and seven of these were in Sydney,” the report noted.
“Ten of the 20 postcodes with the lowest mortgage delinquencies in Australia were in Sydney, while six were in Melbourne.”
One of the patterns that emerges from the data is that home price falls are closely correlated with higher mortgage arrears.
It is not a surprising correlation. If you start having trouble keeping up with your mortgage repayments but your home price has risen then it is pretty easy to put it on the market, sell and pay off your debt.
However, if your property is now worth less than your home loan – known as negative equity – then that is not an option.
That is why Moody’s is expecting some increase in mortgage delinquencies this year from the current reasonably low level of 1.45 per cent.
“Softening housing market conditions, particularly in the key states of NSW and Victoria, will drive delinquencies moderately higher,” the ratings agency warned.
“Less favourable income dynamics and ongoing volatility in the resources sector will also weigh on mortgage performance.”
A growing number of analysts are warning Australians should be wary of home price falls, especially in the south-east.
Capital Economics this week warned that a rising number of real estate listings and falling number of sales indicated that prices, especially for apartments, would start falling in Melbourne and continue falling in Sydney.
Record debt makes households vulnerable
The other factor that has Moody’s warning of rising mortgage defaults in New South Wales and Victoria is the massive run up in debt that has seen home prices surge over the past five to six years in those states.
Across Australia, household debt has risen from 161 per cent of disposable income in 2012 to 188 per cent in 2017.
“Higher debt levels make households more vulnerable to economic or housing market shocks, and make meeting mortgage repayments more difficult, increasing the risk of delinquencies,” Moody’s warned.
On Wednesday, Reserve Bank governor Philip Lowe noted the recent stabilisation and signs of economic improvement in Western Australia and other resources-focused regions.
However, if the Moody’s predictions come to pass, perhaps the baton of economic weakness is now being passed back across the Nullarbor to the east coast.