The level of banks’ non-performing loans and credit losses will peak in the first half of next year at a relatively modest level, according to S&P Global Ratings. Speaking at the firm’s Australian Property Spotlight Seminar yesterday, S&P’s structured finance ratings director Erin Kitson said the proportion of non-performing assets would remain below 1 per cent, slightly higher than the current level but well below levels in 2020 and during the financial crisis. Kitson said the level of credit losses (impairment charges) will peak at around 15 basis points. This is also around historical levels. “Mortgage arrears are still low and that will continue. But what we are seeing is a divergence in arrears rates in different parts of the capital cities,” Kitson said.  Arrears are higher in areas such as Sydney’s south-west and Melbourne’s north-west, where incomes are lower and there are more first home buyers. The capital city areas where arrears are lowest include North Sydney, Sydney’s eastern suburbs and the Australian Capital Territory. A high proportion of high-income earners live in these suburbs.  S&P expects the cash rate to peak at 4.6 per cent later this year. It expects the recent rate of growth in house prices will slow as the impact of higher interest continues to work its way through the system. On the issue of lending standards, Kitson said some non-bank lenders were responding to competitive pressure by taking on riskier lending, such as mortgage lending to the self-employed, self-managed superannuation funds and non-residents. But overall, mortgage characteristics, such as debt-to-income ratios and loan-to-valuation ratios, have tightened. Some lenders are making exceptions to the 3 per cent serviceability buffer rule, but S&P has found the numbers are very small.