Residential mortgage delinquencies to rise post-2016: NAB

National Australia Bank’s chief economist Alan Oster has warned there will be a rise in mortgage delinquencies when interest rates inevitably return to normal levels in three to four years.

He says buyers tempted by historically low interest rates now will be struggling in a few years when they bounce back.

"People need to consider the stability of their employment over the next three to four years before taking out a new mortgage," Oster told The Australian.

“The subprime mortgage collapse in the US was triggered by increasing interest rates.”

The comments came after the Reserve Bank of Australia cut interest rates by 25-basis-points last Tuesday and banks passed the cuts on with rates of between 5% and 6%.

But he said he didn’t foresee interest rates rising again until 2015.