Moody's says Australian investment home loans will suffer greater losses than owner-occupied mortgages in an economic downturn

  • housing investment loans will see higher defaults and losses when compared with owner-occupier mortgages

Moody's in itsreport titled "RMBS - Australia: Rising defaults in Western Australia underscore housing investment loan risks"

They go on:

  • "The impact of an economic downturn on investor loan performance is well illustrated by events in Western Australia over the past four years," says Georgij Ludmirskij, a Moody's Assistant Vice President and Analyst.
  • Moody's explains that unlike the economic situation in the rest of Australia, where unemployment rates are stable, GDP growth rates are steady, and home owners enjoy low interest rates and rising house prices, in Western Australia (WA), economic conditions have deteriorated since 2013.
    The deterioration in WA over the last four years is because of a downturn in the mining sector, and in that state, the default rate for housing investment loans has increased significantly over the last four years and is now higher than the default rate for owner-occupier mortgages.