Map of mortgage defaults 20089/10/2023 Understanding the risks during a downturn represents a significant advance for the Australian mortgage default literature. While examples of localised stress may differ from a nationwide stress event, they likely provide the best possible estimates of credit risk during a period of stress in Australia. Led by property price falls, some mortgages located in these regions fell into negative equity, particularly those in regional Western Australia and Queensland. Regions that were highly exposed to the mining industry experienced housing and labour market downturns alongside the winding down of the mining investment boom. In this paper, I examine the determinants of mortgage defaults in Australia using a new loan-level dataset that captures instances of regional downturns. The determinants of mortgage defaults are likely to be similar in Australia and overseas, but differing legal and institutional frameworks mean that we cannot assume that they will be the same. Yet there have been few studies of the determinants of mortgage defaults in Australia, likely reflecting relatively low default rates and the absence of widespread stress events for periods when detailed data has been available. Understanding their determinants is important for understanding the risks associated with mortgage defaults, and how these can be mitigated. Mortgage defaults can have huge personal and financial stability costs.
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