Fitch Ratings analyst James Zanesi finds housing default risk in Tasmania

Historically soft housing appreciation gives Tasmanians the potential to be more likely to default on their loans, a financial analyst believes. 

It comes after credit ratings agency Fitch Ratings issued a report arguing high underemployment could be responsible for an unexpected increase in mortgage repayment delays. 

The Fitch Ratings report also argued higher unemployment, a slow housing market and rising interest rates could each cause loan servicing pressure, leading to more foreclosures on loans. 

The report’s author James Zanesi told Fairfax Tasmania that house prices that appreciated over a period of five years had a higher likelihood of being paid off if individuals encountered financial difficulty. 

“From a borrower point of view the fact that you actually bought a property that enjoyed house price appreciation gives you the possibility to actually sell the property before you encounter financial struggle,” he said.

Australian Bureau of Statistics data released on Tuesday showed Hobart residential house prices increased in the year to June by 4.9 per cent.

However, they grew by a mere 1.5 per cent in the previous year, and declined during 2012. 

The latest Roy Morgan Research found more than two-thirds of owner-occupied mortgages in Australia were held by households on two incomes, posing risks of repayment if one income earner loses their job. 

Mr Zanesi acknowledged that while regulators had tightened lending regulations, the ultimate variable in mortgage repayments was unemployment. 

A 2015 Fitch Ratings report showed Tasmania was the worst performing state for paying their mortgages on time, with delinquency rates increasing by 33 basis points, compared to 9 basis points nationwide. 

While Tasmania’s unemployment rate has declined over the last two years, employee participation is almost the worst in 10 years at 59.6 per cent, and in the last month 2000 more Tasmanians are working part-time. 

B Debt Free co-owner Malcolm Bartley said years of working in debt administration showed few people under financial pressure had trouble meeting repayments. 

“Borrowers with mortgages who are experiencing difficulty have inevitably one thing in common – they have over-committed their monthly repayment capacity by additional consumer finance,” he said. 

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