Fitch: Surprise jump in Australian mortgage arrears; underemployment a threat

The US ratings agency, Fitch ratings published their latest report on Australia, highlighting concerns over the Australian mortgage arrears against the backdrop of strong economic environment.

Key Quotes:

“Australia's 4bp rise in mortgage arrears to 1.14% in 2Q16 comes as a surprise given the strong economic environment, appreciating housing market, low-interest-rates and low-but-positive real wage growth.”

“The increase, which saw arrears worsen by 6bp yoy, was mainly in the 90+ days bucket, following the migration of the 30-60 days arrears in 1Q16 into longer-dated arrears.”

“A slowdown in the mining sector, which has spilled over into regional areas in Queensland, Western Australia and the Northern Territory may have also affected borrowers. Fitch expects 90+ days arrears to increase in these states.”

“Australia's unemployment rate was 5.8% at 30 June 2016 (subsequently falling to 5.6% in August 2016), among the lowest rate in the previous three years. Meanwhile, the underemployment rate has slowly risen to reach 8.8% in June 2016, a near record high.”

Full report here