Source: Mortgage arrears on the rise, rental vacancies jump The proportion of Australian home owners falling behind on their mortgage repayments has increased, according to ratings agency Standard & Poor's. The global credit ratings giant said May was the seventh consecutive month where mortgage arrears had increased. So-called prime mortgages have an arrears rate of 1.21 per cent, up from 1.14 per cent in April and 1.07 per cent a year earlier. These are mortgages to borrowers with full documentation around their income, savings and assets. The arrears rate for "nonconforming" loans jumped from 4.25 per cent in April to 4.71 per cent in May, but remains well off a peak of 17 per cent in 2009. "Nonconforming" loans include those with limited documentation, so-called low-doc loans, which are often given to small business owners or contractors who have limited evidence of their earnings. Both measures are for those borrowers more than 30 days past due on mortgage repayments, and the figures are drawn from a pool of residential mortgage backed securities (RMBS) issued by financial institutions. Photo: Mortgage arrears are rising at most financial institutions. (Standard & Poor's) The last time arrears rates for the major banks were as high as they are currently was around late-2011 and early-2012. That was when the last interest rate cycle had peaked out at an official cash rate of 4.75 per cent which prevailed between late 2010 and late 2011, before the RBA started cutting again. The overnight cash rate target is currently 1.75 per cent, and widely expected to fall to a fresh record low of 1.5 per cent next month. Rental vacancies rise nationally, jump in Perth At the same time as borrowers are falling behind on their mortgages, the national average rental vacancy rate for investment properties has climbed. The increase is modest at a national level, with vacancy rates rising from 2.4 to 2.5 per cent over the past year according to data from SQM Research. However, the national average masks a dramatic jump in Perth vacancies as the mining boom continues to bust. Perth's vacancy rate leapt from an already high 3.6 per cent last June to 5 per cent this year, a new record in SQM's data. The large number of vacancies has continued to see a massive fall in Perth rents, with asking rents for houses down 9.1 per cent over the past year and units slumping 10 per cent. "Rents are now down in that city by 23 per cent over the last three years," observed SQM's managing director Louis Christopher. Outside the current situation for Darwin, I don't believe rents have fallen this much for any Australian capital city since the Second World War. Over the past year Darwin has not been as bad as Perth, with a 2.7 per cent slide for house asking rents and 7.1 per cent for units. Nationally, house rents averaged zero growth, while unit asking rents rose 3.1 per cent over the past year across the capital cities, with Canberra's 10.7 per cent house rent growth and 8.6 per cent unit asking rent rises leading. Unsurprisingly, Canberra was the city to post the largest fall in vacancies, down 1 percentage point to just 1.2 per cent.