A day after cutting the credit ratings of nearly all Australian mortgage lenders (except for the major banks), S&P Global Ratings said mortgages in default for over 90 days had widened.

Mortgages more than 90 days in arrears, which had averaged around 0.50% for the past decade, were 0.62% in March, according to the ratings agency. “This trend partly reflects a greater alignment in hardship reporting in recent years,” it said.

The rise in mortgage defaults clouds an otherwise improving scenario, as the number of delinquent housing loans underlying the Australian prime residential mortgage-backed securities (RMBS) fell to 1.16% in March, from 1.23% in February. The reduction in overall dues was attributed in part to increased home loan balances, S&P said.

On Monday, S&P Global Ratings cut the ratings of 23 Australian financial institutions—including AMP, Bendigo and Adelaide Bank, and Bank of Queensland. The ratings agency cited the risk of a sharp fall in property prices for the mass downgrades.

Household cash flow has slumped

Aussie households with close to record debt are getting squeezed, according to the latest economic data. A combination of record-low wages growth, higher petrol and utility prices, and out-of-cycle mortgage rate increases means that household cash flow has slumped in the first part of 2017, UBS economists said.

Mortgages 31-60 days past due improved in March, with non-bank originators recording the largest improvement in mortgages more than 30 days in arrears.

Arears fell in New South Wales, Victoria, and Queensland, which collectively account for approximately 80% of total outstanding loan balances. NSW recorded the largest decrease, with loan arrears declining to 0.85% from 0.95%, against a backdrop of rising outstanding loan balances, S&P said.     
 

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