Prime home-loan arrears stabilise in May

Prime home-loan arrears stabilised in May after rising in preceding months, and the trend is expected to continue in the next quarter, S&P Global Ratings said in its monthly report on Wednesday.

The Standard & Poor’s Performance Index for Australian prime mortgages was largely unchanged at 1.52 per cent in May, compared with 1.53 per cent in the previous month, the credit ratings agency said in the report which does not constitute a rating action.

Arrears were up 13 basis points year-on-year, though the deterioration dissipated in May.

Arrears fell across most of the country during the month, with small declines in New South Wales and Victoria, while only the Australian Capital Territory and Tasmania recorded increases, S&P said.

“Interest-rate and tax cuts will assist with debt serviceability, aided by the historical seasonality of arrears,” the agency said.

S&P said it expected these factors would mainly affect the less-severe arrears categories and that borrowers who are deeper in arrears are more likely to struggle due to fewer refinancing options.


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