Arrears risk in natural disasters: Moody’s

More frequent bushfires and floods raise the likelihood of more mortgage-payers falling behind in parts of Australia battered by natural disasters, Moody’s Analytics researchers say, although the spike can reverse into a dip within months.

“Natural disasters can disrupt economic activity and reduce incomes, as well as lower property values in affected areas, all of which raise the risk of mortgage delinquencies and losses,” Moody’s analyst Joanne Kung said.

But the analyst’s report suggests the effect is only temporary, with Cyclone Debbie’s devastation of Queensland in March 2017 coinciding with a rise in the number of home loans in arrears of more than 30 days from 2.0 per cent to 2.3 per cent and then dipping to 1.9 per cent within eight months.

Similarly, the 30-day delinquency rate in central western NSW towns affected by flooding in September 2016 increased from 1.7 per cent to 2.4 per cent but was down to 1.0 per cent by May 2017.

Moody’s said this was likely because of financial assistance provided by governments and laws requiring banks to offer loan repayment deferrals after disasters.

The report said NSW bore the brunt of Australian “significant natural disasters” in the last 48 years, being hit with 30.5 per cent of such events, while Queensland had 28.9 per cent and Victoria had 13.7 per cent.

AAP

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