May 10, 2011 – As the soaring living costs stretch household budgets to breaking point, mortgage customers are now seen to have defaulted on their loans at a faster pace as compared at the height of the global financial crisis.
According to the nation’s second-biggest home lender, Westpac, it reported last week that a rise above the peaks is seen on mortgage delinquency rates as compared when it had reached late in 2008 as the crisis swept around the globe.
Gail Kelly, Westpac chief, while unveiling the bank’s record first-half profit last week, said in her statement that mortgage delinquency rates were likely to climb further although it would be off a low base as households struggled with rising utility bills and other costs.
According to the data released last week, customers accounting for about 1.5 per cent of Westpac’s $275 billion home loan book were reported to be more than 30 days behind on their repayment schedule at the end of March.
Also the percentage of home loan clients more than 90 days late has jumped to 0.6 per cent which is almost double the rate of a year ago and significantly above the high watermark hit during the financial crisis.
Defaults are gaining pace in every state, although Queensland has experienced the biggest acceleration in delinquencies which is compounded by the natural disasters that plagued the state over the summer months.
The rise in defaults which comes in spite of the healthy state of the nation’s employment market is said to point to a new wave of repayment stress in Australia’s mortgage belt.
Jonathan Mott, UBS analyst, probed whether the surge was compelled by the first home for sale buyers who used grants to enter the market.
Mr. Mott said that the abrupt rise in the percentage of customers who were at least 30 days behind on payments was likely to “flow through over time” to the percentage at least three months late.
According to Mrs. Kelly, the boost in delinquencies was “entirely within our expectations”.
The disclosure came about as Westpac announced a cash profit for the six months to March of $3.17 billion, which is up 7 per cent on the same period a year ago in a result aided by a sharp fall in the charge for bad and doubtful debts.
Previously announced by the group, relating to its 2008 acquisition of St George, a net profit soared to $3.96 billion was seen which is a 38 per cent increase largely fuelled by a favorable taxation ruling.
Victor German, Nomura analyst, stated that despite the 2.5 per cent fall last week in the value of the group’s share price on a downbeat day across the market, there were “no obvious problems” with Westpac’s result.
Mr. German said that some investors were anxious that the boost in profit, which beat analysts’ forecasts, was largely fuelled by the sharp fall in the charge for bad and doubtful debts.
