Home loans at least 30 days in arrears rose from 1.25 per cent in the March quarter to 1.38 per cent in the June quarter, Moody’s Investors Service reported.

The figures are drawn from the prime residential mortgage-backed securities that Moody’s rates.

The delinquency rate for non-conforming mortgages rose from 3.84 per cent to 3.98 per cent over the same period.

Moody’s said the delinquency rates are below the recent peak of 1.78 per cent for prime mortgages and 4.8 per cent for non-conforming mortgages in March 2020, at the onset of COVID-19.

“We expect delinquency rates will continue to rise over the rest of 2023,” Moody’s said.

“While the Reserve Bank has paused its cycle of intertest rate rises, the central bank’s steep rate hikes between May 2022 and June 2023 have considerably raised mortgage repayment costs. 

“Additionally, inflation, while easing from recent peaks, remains well above the RBA’s target range. The combination of high interest rates and inflation has materially reduced Australia’s household savings ratio to 3.2 per cent – the lowest level since 2008, which is weakening the capacity of financially vulnerable borrowers to meet mortgage repayments.”

Moody’s said further rises in delinquency rates would be “moderate”, given the country’s low unemployment rate.