No white-collar recession as rich and middle class keep up with mortgage payments: Fitch Ratings

Talk of a so-called white-collar recession appears unfounded, with borrowers living in the most affluent parts of Sydney, Melbourne, Brisbane and Perth managing to keep up to date with their mortgage repayments, according to the latest mortgage arrears figures from Fitch.

Its September Australian Mortgage Delinquency by Postcode report highlights that “affluent regions still performing”.

Fitch says the best-performing regions exhibit “strong resilience in terms of mortgage performance”, with the weighted average delinquency rates in the top 10 best-performing regions worsening by just 12 basis points to 0.81% from 0.69%, in September 2011, versus a national decline of 18 basis points from 1.7% to 1.86% over the same period.

The top two positions were unchanged.

Lower northern Sydney, home to harbour-view suburbs like Mosman, Neutral Bay, Kirribilli and Cremorne, remains the best0performing region by both value and number of mortgages in arrears as of March 2012, with an average of just four mortgages out of 1,000 delinquent by 30 days or more.

Fitch says this reflected the “solid socio-economic situation in the region”.

Boroondara City in the eastern suburbs of Melbourne and incorporating Hawthorn, Kew and Camberwell, ranked second, with a delinquency rate of 0.43%.

A notable inclusion in the top 10 performing regions was central metropolitan Perth – the inner and middle suburbs of Perth – which ranked as the third best-performing region, with a delinquency rate of 0.45%. The region did not rank in the top 10 six months ago.

Fitch notes that delinquencies in Perth have improved despite the general increase in Australia during the September 2011 to March 2012 period.

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 “In particular, central metropolitan Perth showed a remarkable improvement in terms of both value and number of borrowers in arrears: as of March 2012, the 30+ day delinquency rate was 0.78% versus 1.19% in September 2011, and only five borrowers out of 1,000 were delinquent," commented Fitch.

This improvement was in line with south-west WA dropping out of the worst-performing regions in Australia as of the March 2012 survey with the 30-plus-day delinquency rate dropped 32 basis points to 1.85%, from 2.17% in September 2011 (and against the national trend of delinquencies rising by 18 basis points over this period).

“This is a remarkable improvement, considering that delinquencies already dropped 76 basis points in the March 2011 to September 2011 period,” notes Fitch.

“The improvement was particularly noteworthy in the 90+ day bucket, with arrears decreasing to 0.98% in March 2012 from 1.33% in September 2011. This indicates an increasing clearance rate for secured properties of delinquent loans that have rested in the 90+ day bucket due to a stagnating housing market.”

Overall, south-west WA performed better than the rest of the country due to the flow-on effects of rising income from the mining boom.

However, the rest of WA, excluding Perth and south Western Australia, showed a slight worsening in mortgage performance, with 30+ day arrears increasing to 2.00% in March 2012 from 1.84% in September 2011.

As of March 2012, the 30+ day arrears rate in WA was recorded at 1.59% compared to 1.50% in September 2011 and 1.99% in March 2011.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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