A report by Standard & Poor's indicates that Australia's mortgage arrears rate rose to record levels in March. House prices were continuing to drop and oil prices to rise.
Homeowners are really having a tough time of finding the dollars to meet the increased mortgage payments as the interest rates climb higher putting pressure on mortgage payments and fuel prices at the bowser jump up virtually daily. Surveys have shown however that homeowners will do anything to retain the family home.
Payments more than 30 days overdue on so-called prime loans increased to 1.45% of mortgages used to secure bonds.
Australia's Reserve Bank has increased the benchmark cash lending rate four times since August to a 12-year high of 7.25% to cool the fastest inflation in 17 years. Banks have raised interest rates by amounts greater than only the lending rate at the same time that housing affordability is at a three-decade low.
''The outlook for the property market is mixed with the population-driven shortage in the housing market cushioning any downward pressure on property prices,'' S&P analysts led by Vera Chaplin wrote in a report. Mortgages are remaining in arrears for longer and losses are increasing, it said.
Property prices are expected to improve in 2009.
Arrears on subprime loans in residential mortgage-backed securities, as measured by S&P's SPIN index, rose to 14.66% at March 31 from 12.29% in December last year.
About 1.1 million Australians are paying more than 30% of their income in rent or home-loan costs, Prime Minister Kevin Rudd said in a speech earlier this year.
A housing affordability committee has recommended Australia consider a government-backed mortgage agency similar to the Fannie Mae in the US, according to a report tabled in parliament in Canberra yesterday.
A state-backed lending agency, AussieMac, would leverage the government's top AAA rating to buy home loan-backed securities and repackage them as low-cost mortgage bonds to be sold to investors. It would boost liquidity and enable smaller operators to fund their mortgage borrowings, the committee said.