Credit rating agency Moody’s warns a growing number of borrowers will struggle to meet their mortgage payments in the coming months, as COVID-19 emergency support schemes come to an end.
Despite the huge financial shock caused by the pandemic, mortgage arrears fell during the December half as the economy was shielded by a wave of taxpayer support, including the JobSeeker wage subsidy, and banks allowed customers to defer their payments.
Moody’s said the end of support schemes from the government and banks would push up mortgage delinquencies.Credit:Paul Rovere
But with much of this support set to be withdrawn at the end of this month, a Moody’s report on Monday predicted more borrowers would fall behind on their loans in the first half of this year – a view shared by the major banks.
The increase is expected despite the buoyant housing market making it easier for some struggling borrowers to sell their property as a way of clearing their debts.
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“Rising house prices will curb mortgage delinquencies risks to some extent, because they will make it easier for borrowers in financial difficulty to sell their properties and repay loans,” Moody’s said.
“But the positive influence of rising house prices will not be enough to prevent delinquency rates from increasing in the first half of 2021.”
Moody’s said it expected the situation would turn around, and delinquency rates would start to improve again, as the economic recovery gained momentum in late 2021.
The ratings agency said only 1.44 per cent of major bank customers were more than 30 days or more behind their scheduled repayments in December, down from 1.82 per cent a year earlier.
