The proportion of non-performing mortgages on authorised deposit-taking institutions’ books rose over the past year but remains below levels reported in 2020 and 2021, and is in line with pre-COVID levels. According to APRA’s ADI statistics for the December quarter 2023, the proportion of residential mortgages in arrears (30 to 90 days overdue) rose from an average of 40 basis points in the December quarter 2022 to 60 bps in the December quarter last year. The proportion of non-performing loans rose from 70 to 90 bps over the same period, which APRA described as a “marginal increase”. APRA said: “Most borrowers have adapted to higher interest rates and managed their repayments well. However, a small but growing segment are facing financial stress, resulting in another quarterly increase in non-performing loans”. APRA noted that more than half the housing loans fixed at very low rates have rolled off onto higher variable or fixed rates, and borrowers have largely been able to absorb the increased repayments. Lenders pulled back on lending at high debt-to-income ratios. The proportion of new lending in the December quarter at DTIs of six times or more was 5.6 per cent, compared with 11 per cent in the December quarter 2022. Lending at high loan-to-valuation ratios rose. The proportion of new lending in the December quarter at LVRs of 80 per cent or more was 31.4 per cent, compared with 30.6 per cent in the December quarter 2022. APRA was not troubled by this, noting that 82 per cent of outstanding mortgages have LVRs below 80 per cent. It said credit losses are expected to remain low, given better than expected economic performance, and in any case the industry is well positioned to manage losses.