Finance & Fury Podcast

Hey guys and welcome to Finance and Fury! Today we’re joined again by Jayden to talk about whether property prices will keep declining due to higher mortgage arrears. The RBA’s cookie cutter approach to rates will continue to try and help reduce chances of mortgage default and ease burden on household cashflow. Why is it that an increasing share of housing borrowers are behind in their mortgage repayments? Points to a rising risk to the financial system as housing loans are 40% of banks assets directly This is in addition to trillions sitting in derivative style instruments which use these mortgages as their underlying assets When the property backing the loan exceeds the value of the loan then arrears aren’t a big deal for banks. They take the deed of your home and take back their loan (plus unpaid interest/costs). With falling housing prices however, the potential for banks to experience losses increases. Where are arrears at While it is increasing, the rate of arrears in Australia is still relatively