Outlook for home loan serviceability deteriorates

Almost a quarter of home loan borrowers have had difficulty meeting their mortgage repayments over the past year, according to a survey published yesterday.

The latest Genworth Financial Mortgage Trends Report reveals that two per cent of borrowers had difficulty meeting repayment in every month in the past year.

Combined with the 21 per cent who had some difficulty making payments "during some months" over the past year, 23 per cent of home loan borrowers experienced some level of difficulty.

And the outlook is deteriorating, with more borrowers worrying about the year ahead. Twenty-seven per cent said they could foresee problems with their home loans over the next 12 months.

Four per cent said they expected to have trouble with every payment.

The survey is based on a survey of 2000 adults conducted for Genworth by Retail Finance Intelligence

RFI research director Alan Shields said there was no evidence of deterioration in mortgage stress. The proportion of mortgagors experiencing some level of difficulty, at 23 per cent, was the same in the 2007 and 2008 surveys.

Shields said 77 per cent reported that they made their payments "easily" and of those 31 per cent said they made overpayments during the year.

Shields said: "The fact that the majority of mortgagors were able to easily meet their repayments in every month is encouraging, given that there have been four cash rate rises in the 12 months preceding the 2008 survey."

As a result of those rate increases, respondents said their median monthly mortgage payment went up from a range between $1000 and $1500 in 2007 to a range between $1500 and $2000 in the latest survey.

The survey found that the number of first-home buyers who have no deposit when they purchase their property has risen sharply. Of respondents who bought their first home between 1990 and 1996, five per cent did so without a deposit.

Of those who bought their first home between 1997 and 2002, six per cent did so with 100 per cent finance. And of those who bought their first home between 2003 and 2008, nine per cent did so without a deposit.

Despite this increasing reliance on high loans to valuation ratios, respondents were sceptical about the merits of mortgage product innovations aimed at addressing affordability.

Only 35 per cent of non-property owners said they would consider a 100 per cent LVR mortgage. The most common reason for rejecting the no-deposit option was that it would be too expensive.

Only 34 per cent said they would consider a family guarantee mortgage, down from the 41 per cent in the 2007 survey who said they would consider it.

Long-term mortgages were a more popular option. Fifty-one per cent of respondents said they would consider a mortgage with a 35- or 40-year term as a way of making their house purchase more affordable.