High mortgage delinquency in Perth

New data from Moody’s shows Perth mortgage delinquency rates are the highest in Australia, despite the capital city also holding one of the highest average incomes in the country.    

The data compares a range of housing affordability variables to a home owner’s proximity to the CBD.

Delinquency rates measure the percentage of loans that have late or overdue payments.

Perth delinquency rates were between 2 and 3 per cent, slightly more than Adelaide’s range of about 1.9 to 2.6 per cent.

Sydney had the lowest range of 0.5 to 1.5 per cent.

Moody’s also measured income in each capital city based on proximity to the CBD, with Perth recording the second highest average income range of $60,000 to about $80,000, behind Sydney at $60,000 to $90,000.

Melbourne and Brisbane both had an income range of about $50,000 to $75,000.

Perth also registered the highest mortgage loan to value rate of about 73 per cent for households located 30 to 40 kilometres from the CBD.  

Overall, the Moody’s analysis found that mortgage delinquencies across the country are more likely to occur in outer suburbs because of lower incomes and weaker credit characteristics.

“On average across Australian cities, mortgage delinquency rates are lowest in areas within five kilometers of central business districts (CBD) and highest in areas 30-40 kilometers from CBDs,” the data company said.

“In the residential mortgage-backed securities (RMBS) we rate, delinquency rates are in many cases higher in deals with relatively large exposures to mortgages in outer areas.

“Average incomes are lower in outer suburbs than in inner-city areas, while mortgage loan-to-value (LTV) ratios are higher on average in outer areas and socioeconomic conditions are typically weaker.

“These factors increase the likelihood of mortgage delinquencies and defaults in outer areas, particularly in the event of an economic downturn.”

Interest only loans in Perth made up nearly 30 per cent of all loans of those living within five kilometres of the CBD, which was the second highest rate in the country.

The data also revealed that within five kilometres of the CBD in Sydney, Melbourne and Brisbane, at least 50 per cent of mortgages are extended for investment purposes.

“There is also a high share of interest-only loans in these areas,” Moody’s said.

“In the event of a prolonged downturn in house prices, mortgage delinquencies and defaults could increase in inner-city areas with a high share of investment and interest-only loans, though in general we expect delinquencies and defaults to remain higher in outer suburbs.”