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Home loan arrears

My colleague John Black has done some interesting analysis of home loan arrears which could go some way to explaining why Labor is in trouble in Queensland more than most other states - because it picks Queensland as a home arrears hotspot.

We had a piece in the Australian Financial Review over the weekend, in which we profiled the recent Fitch Ratings home loan arrears data by postcode.

The link to the AFR site is http://afr.com/p/national/who_who_on_the_mortgage_arrears_nO9i1TOt6BSZ3m1Udl13wO

The AFR website has a pay wall, but there’s a free trial available. The on line version includes an interactive Google style map, with the predicted changes in arrears for all postcodes in Australia over the past year. You can type in your postcode and check it out. If you want the same material down to CCD level, get in touch. The on line report also includes a full PDF report of the data profile, including arrears increases by Federal seats.

The gist of the profile was that a few groups have got into difficulties, but the mainstream home buyers are still doing well, especially by international comparisons.

Groups in some trouble include

  1. recent home buyers, who bought with stimulus incentives before interest rates rose
  2. negative gearers, especially those transitioning to retirement who are getting jammed by unemployment with tenants, higher interest rates, diminishing house and land values, and cash flow problems
  3. parents of more expensive private school students, where the spouse is having difficulty finding a part time job.
  4. Howard Battlers made good, who socked too much money into super in 2007 after the super changes, instead of paying off their mortgage.

To a certain extent, groups 2, 3 and 4 overlap a bit.

When we mapped these groups we saw the impact was very heavy in fast growing new arrears, with high population turnover and in some wealthier suburbs, where they either had non-residential investments in real estate, or high proportions of children at the more expensive private schools.

When you go a step further and aggregate these suburbs into regions and states, you see a lot of problems in Queensland, where these groups are concentrated. Queensland is now the home loan arrears hot spot for Australia.

According to recent trends by state, the problem will get worse before it gets better. The Fitch Ratings report is based on securitised loans but it is supported by recent comments from the banks.

So the mature age and the younger are the ones most affected, and you're not going to notice it that much because these are groups that externally are going to look pretty affluent, but now they're probably propping that affluence up by buying it at a discount, or only when it's on sale, which helps to explain retail figures.

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