First-home buyers could be at greater risk of slipping into arrears on their home loan if they use the Albanese government’s First Home Guarantee expansion.
Victoria is home to the nation’s home loan pain capital as one in 100 of the state’s mortgages are currently behind on repayments by at least 30 days.
S&P Global Ratings have calculated that 1 per cent of the state’s mortgages are in arrears, the highest level of any state — with only Canberra and the Northern Territory worse off.
And they come with a stark warning that first-home buyers using the Albanese government’s expanded First Home Guarantee are putting themselves at risk of joining the sad mortgage statistics.
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The Victorian numbers are close to double the levels in Tasmania and Queensland, where it’s closer to one in every 200 home loans in arrears, and well ahead of South Australia’s about one in 150.
Melbourne is also dominating the nation’s worst-performing postcodes for staying on top of mortgage repayments, with six of the nation’s 10 poorest results recorded in the Victorian capital — a list it has dominated for 18 months now.
Postcode 3064 around Craigieburn tops the list with almost one in every 33 mortgage holders 30 days behind or more, while Pakenham, 3810, was third with 2.41 per cent of home loans in arrears in the September quarter.
Hoppers Crossing, 3029, Werribee, 3030, Frankston, 3199, and Melton South, 3338, are also among the nation’s 10 most behind on their mortgage, with arrears rates from 1.59 per cent to 1.7 per cent.
Erin Kitson said Australia’s arrears position was improving, but one state stood out above the rest.
S&P credit analyst Erin Kitson said it was worth noting Victoria’s arrears issues had declined since interest rate cuts commenced in February, as had everywhere else in the country, and were now at healthy levels.
But she said it was still showing the worst signs of any state — a position it had taken over from Western Australia as much as 18 months ago.
Ms Kitson said there was “quite a close connection” between mortgage arrears and home price growth, and Victoria’s relatively weaker growth than other state’s in the past few years could have led to homeowners being unable to sell properties they couldn’t afford the mortgage for — or even unable to refinance their loan if they had low equity.
S&P Global Ratings analysis shows arrears ratesaround Australia. Source: S&P Global Ratings.
“And I think the high property taxes for investors has had an effect, having caused greater cash flow problems for investors,” she said.
With no further interest rate cuts anticipated this year, the analyst is anticipating there will be little change over the final months of the year.
However, Ms Kitson said with the federal government’s October expansion of the First Home Guarantee effectively allowing an unlimited number of would-be market entrants to borrow up to 95 per cent of their home’s cost could lead to more being at risk if the Reserve Bank hiked rates in the future.
The Albanese government’s October expansion of the First Home Guarantee could leave market entrants more vulnerable to future rate hikes. Picture: NewsWire / Martin Ollman
“Any increase in household indebtedness, particularly if they are younger and don’t have savings buffers or a secondary property, that puts them in a more vulnerable position when the rate cycle changes direction,” she said.
Around the rest of the country, the remaining postcodes in the top 10 for mortgage arrears were Baulkham Hills, 2153, at 2.48 per cent, Casula, 2170, at 2.27 per cent, Berkshire Park, 2765, where 2.2 per cent of home loan holders were behind on repayments, and Camden, 2570, which had a 1.52 per cent arrears rate.
All the areas were located in NSW, which has a 0.92 per cent arrears rate across the state — second worst only to Victoria.
The Northern Territory was worse than any state, with 1.21 per cent of owners behind on their repayments, while the ACT had 1.06 per cent.
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