One in 50 Queensland mortgage holders is in arrears

Queensland is ranked as the worst-performing state for mortgage arrears, with a rise to 2% of mortgages in default as at March 2011, meaning one in 50 Queensland mortgage holders cannot pay their lenders on time. This is up from 1.54% six months earlier, according to Fitch Ratings in its analysis of mortgage performance.

The report notes the natural disasters such as the December/January floods were not the main factor in the rise in delinquency rates in Queensland, with unaffected regions including the Gold Coast and Logan City strong contributors to the increase in the state's delinquency rate.

Although the report noted delinquencies in certain postcodes located in flood-affected areas had increased, it suggests the Queensland arrears spike was beginning to emerge before the floods and Cyclone Yasi.

Fitch points to the state’s 6.6% unemployment rate in February, which was the highest in six years.

"The higher unemployment rate in conjunction with the increase in interest rates and the floods has severely impacted households' serviceability," says James Zanesi, associate director in Fitch's structure finance team.

"The longer-term concerns regarding affordability will now depend on future monetary policy decisions, as well as the increased cost of living."

The number of loans considered to be 90 days in arrears in Queensland was attributed to troubled properties not being easy to sell in a flatlining property market.

The Fitch report analyses the performance of the local residential mortgage market using data covering approximately 17% of all mortgages in Australia – more than 1 million loans – with a total outstanding balance of more than $186 billion.

Queensland’s Logan City is the new worst-performing region in Australia, with one delinquent mortgage out of every 48. The Queensland postcodes 4132 (Crestmead/Marsden) and 4114 (Kingston), both in the Logan City region, were the worst performing postcodes in Australia, with 3.3% of borrowers in arrears by one or more payments. It is the first time in the history of the report that Queensland was the worst-ranked state.

Fairfield-Liverpool in New South Wales continues to be the worst-performing region in Australia by mortgage balance size, with a 30+ days delinquency rate of 2.99%.

Mortgage performance in metropolitan Perth improved in the six months to March 2011, with the improvement mainly due to a strong decrease in 90+ days delinquencies.

Arrears levels in Victoria increased over the six months to March 2011, although the state is still performing well, with an overall delinquency rate of 1.34%, which is considerably lower than the other large states of New South Wales (1.93%) and Queensland (2%).

Zanesi notes that future developments in Australian monetary policy, increasing cost of living and the housing market may continue to affect delinquencies during 2011.

In the event of further interest rate hikes, the agency believes that regions that have shown sensitivity to interest rate movements will continue to be the most affected.

A softening of the housing market in specific geographical areas may also affect total delinquencies, with 90+ days arrears expected to accumulate as properties are sold at a slower pace.