MORTGAGE ARREARS, DEFAULTS & FORECLOSURES ON HOMES IN MINING TOWNS

Posted by Henry | BANKRUPTCY,BANKS,GETTING OUT OF DEBT,HOME LOANS,MINING TOWNS | Thursday 27 August 2015 2:19 am

Mining regions are experiencing higher rates of mortgage arrears, Fitch Ratings says image www.australianmartgageloans.com.au

Mining regions are experiencing higher rates of mortgage arrears, Fitch Ratings says. Photo: Manfred Gottschalk

Job cuts in the resources sector are causing more households in mining regions to fall behind on their home loans, highlighting the risk to banks from the commodities slump.

Mortgage arrears rates are rising in mining regions across Queensland, Western Australia and the Northern Territory, Fitch Ratings said, due to deep costing cutting by miners.

At the same time, the house price boom in Sydney has dragged down the share of borrowers falling behind in suburbs in the city’s west and southwest – areas that have historically had among the highest loan delinquency rates in the country.

Mackay in central Queensland, a hub for the struggling coal industry, became the region with the highest share of loans by value that were more than 30 days in arrears, at 2.01 per cent.

This occurred after the region, which includes the Hay Point coal terminals, posted the sharpest deterioration in arrears in the six months to March, with a lift of 0.59 percentage points.

Regional Western Australia, which includes mining hubs such as Broome and Kalgoorlie, was the second-worst performing region, with an arrears rate of 1.88 per cent.

Fitch said mining-heavy areas of the Northern Territory were also affected by the trend.

“The slowdown and job cuts in the mining industry have hit non-metropolitan regions in the outback of Western Australia, in Northern Territory, and in the north and outback of Queensland,” the report said.

Despite more loans in mining areas falling into arrears, Fitch analyst James Zanesi said there had previously been higher arrears rates of 2.5 per cent to 2.6 per cent in other areas, such as Fairfield and Liverpool in Sydney or the Gold Coast after the global financial crisis.

“It’s the worst performing region, but in the past we’ve had worst performing regions with a higher delinquency rate,” Mr Zanesi said.

The best performing areas, in contrast, were the inner suburbs of Perth, Sydney, Brisbane and Melbourne.

The report also said there had been a “remarkable” improvement in performance in outer west Sydney, Fairfield and Liverpool, and the central coast of NSW, which had been among the worst performing regions in the past decade.

The 30-day arrears rate had fallen from 1.92 per cent to 1.19 per cent in Fairfield-Liverpool in the year to March. While this is still higher than average, the improvement is significant.

Mr Zanesi said one reason for this change was Sydney’s booming housing market, which allows banks to sell houses with mortgages in default more quickly, moving them off their books. Borrowers in difficulty are also more likely to sell their house before defaulting when prices are rising.

“If you have a booming housing market you actually have an opportunity to sell the property before financial difficulties materialise,” he said.

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Henry Sapiecha
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