Unemployment elevates arrears at major banks
Arrears management for banks continues to be a two-sided challenge, with Standard & Poor's data on arrears in regional areas diverging further from subdued levels in major metro areas.The trend is one driver of a marked rise in the level of home loan arrears for major banks this year."Outside of Sydney and Melbourne, employment and economic conditions are tougher, and higher household indebtedness is clearly having an effect," S&P said in a report issued yesterday.Arrears have been "about 60 per cent higher in regional areas than in metropolitan areas since the beginning of 2016," S&P said."We expect the rates to continue to diverge, particularly in Queensland and Western Australia, where regional unemployment is high."At a national level S&P said the number of Australian housing loans in arrears on prime residential mortgage-backed securities fell to 1.14 per cent in August 2016 from 1.16 per cent in July. S&P said the decline continued from June and July, after rising for seven consecutive months to May.S&P said arrears fell month on month for all originator categories except non-banks, which recorded an increase to 1.06 per cent in August from 1.04 per cent in July. ??For major banks S&P said "arrears have increased by more than 35 basis points during the past year, but at 1.08 per cent are still low. The major banks' arrears historically have tracked below one per cent, but this trend was reversed in March and they have tracked above one per cent ever since."