Sydney, Melbourne outer suburbs have double the rate of loan arrears

afr.com:

Borrowers in Sydney’s south-western suburbs and in Melbourne’s north-west are more than twice as likely to be a month or more behind paying their home loans, data compiled by ratings agency S&P has found.

And while the number of mortgages in arrears remains low across the country – at about 1 per cent of loans – the new figures will push banks away from lending in particular areas, the analysis suggests.

The areas where mortgage arrears are highest are Sydney’s south-west and outer south-west.  Frances Mocnik

The Reserve Bank, which is expected to lift rates to 4.35 per cent next week, has previously warned that pressure on borrowers is “unevenly spread”, with banks already setting lending limits on some suburbs.

The S&P figures show mortgages more than 30 days late are highest in Sydney’s south-west, with some 2.5 per cent behind, followed by Perth’s north-west, Melbourne’s north-west and the Blue Mountains. That correlates with where properties have been more affordable, which in turn has attracted higher-leveraged first home buyers.

Banks will examine the data as they determine lending policies such as requiring higher deposits. “Banks look at their aggregates, and at system levels overall arrears are still low. But [the analysis] may influence bank lending decisions, and where they may be more cautious in particular areas,” said Erin Kitson, an S&P analyst.

“While unemployment remains low, and overall arrears are still below pandemic levels, when we look at the capital cities we are seeing a divergence in the places where borrowers are late to repay.”

Another ratings agency, however, said it had yet to identify major discrepancies in mortgage performance based on geographical areas, adding that the type of borrower