The transition to less interest-only loans (IO loans) is affecting arrears.
Mortgage arrears rates, outside Western Australia, have been increasing since the beginning of 2018. A key driver is the transition from IO loans to principal and interest loans which, for some mortgages, can increase payments by up to 40 per cent.
The transition is a result of tighter credit regulations which make it more difficult to roll over to new IO loans. The lower share of new IO loans means we are unlikely to see a large volume of expiries. We are about mid-way through the transition from a high volume of IO loans to a low volume.