RDP 2020-03: The Determinants of Mortgage Defaults in Australia – Evidence for the Double-trigger Hypothesis Appendix B: Full Results

Michelle Bergmann

July 2020

Figure B1: Stage One Relative Hazard Ratios – Entered Arrears
Evaluated at data percentiles
Figure B1: Stage One Relative Hazard Ratios – Entered Arrears

Notes: Dots represent the relative hazard ratio of the 99th percentile observation to the 1st percentile; bars represent the interquartile range; hazard ratios that are less than 1 are inverted
(a) Estimate from model excluding the SEIFA variable

Sources: Sources: ABS; Author's calculations; CoreLogic data; RBA; Securitisation System

Figure B2: Stage Two Relative Hazard Ratios – Foreclosure
Evaluated at data percentiles
Figure B2: Stage Two Relative Hazard Ratios – Foreclosure

Notes: Dots represent the relative hazard ratio of the 99th percentile observation to the 1st percentile; bars represent the interquartile range; hazard ratios that are less than 1 are inverted
(a) Estimate from model excluding the SEIFA variable

Sources: ABS; Author's calculations; CoreLogic data; RBA; Securitisation System

Table B1: Stage One Results – Hazard Ratios
Competing risks, Cox proportional hazards model; all loans originated since 2013; time variable is months since origination (seasoning); quarterly observations
Dependent variable: Entered 90+ day arrears Entered 90+ day arrears Entered 90+ day arrears Entered 90+ day arrears Entered 90+ day arrears Full repayment
Sample: All loans All loans Non-mining Mining-exposed Negative equity All loans
Model: Base Excl SEIFA Base Base Base Base
Indexed scheduled LVR (base = (60,70])
(0,30] 0.900*
(0.045)		 0.882*
(0.045)		 0.873*
(0.050)		 1.068
(0.115)		 n/a 0.834***
(0.008)
(30,40] 0.779***
(0.045)		 0.769***
(0.045)		 0.763***
(0.049)		 0.854
(0.129)		 n/a 0.787***
(0.008)
(40,50] 0.827***
(0.035)		 0.820***
(0.035)		 0.813***
(0.037)		 0.926
(0.104)		 n/a 0.830***
(0.006)
(50,60] 0.885***
(0.027)		 0.881***
(0.027)		 0.885***
(0.029)		 0.906
(0.089)		 n/a 0.918***
(0.005)
(70,80] 1.142***
(0.023)		 1.145***
(0.023)		 1.167***
(0.025)		 0.954
(0.065)		 n/a 0.989
(0.005)
(80,90] 1.319***
(0.027)		 1.322***
(0.027)		 1.319***
(0.032)		 1.153*
(0.061)		 n/a 0.816***
(0.007)
(90,100] 1.494***
(0.036)		 1.485***
(0.036)		 1.497***
(0.053)		 1.295***
(0.067)		 n/a 0.556***
(0.012)
(100,110] 1.872***
(0.046)		 1.841***
(0.046)		 1.745**
(0.141)		 1.652***
(0.073)		 Base 0.398***
(0.024)
(110,120] 2.014***
(0.070)		 1.963***
(0.070)		 2.233**
(0.270)		 1.737***
(0.093)		 1.019
(0.076)		 0.410***
(0.048)
(120,150] 2.129***
(0.083)		 2.041***
(0.083)		 2.074*
(0.260)		 1.750***
(0.105)		 1.006
(0.094)		 0.605**
(0.048)
(150,200] 2.730***
(0.145)		 2.623***
(0.145)		 n/a 2.530***
(0.161)		 1.294
(0.160)		 0.670*
(0.098)
200+ 3.299***
(0.201)		 3.233***
(0.201)		 n/a 3.657***
(0.217)		 1.488*
(0.230)		 0.652*
(0.177)
Original LVR (base = (60,80])
(0,60] 1.054
(0.028)		 1.051
(0.028)		 1.093*
(0.032)		 0.856*
(0.062)		 0.767
(0.216)		 1.087***
(0.005)
80+ 1.286***
(0.019)		 1.307***
(0.019)		 1.312***
(0.023)		 1.241***
(0.038)		 1.415**
(0.091)		 1.145***
(0.005)
Turnover ratio 1.014
(0.007)		 1.020
(0.007)		 1.030*
(0.007)		 0.934
(0.026)		 1.008
(0.040)		 1.041***
(0.001)
Unemployment rate 1.075**
(0.018)		 1.207***
(0.018)		 1.137
(0.042)		 1.150**
(0.034)		 1.083
(0.073)		 1.061
(0.007)
Unemployment rate^2 0.998*
(0.001)		 0.994**
(0.001)		 0.992
(0.003)		 0.996*
(0.002)		 1.000
(0.003)		 0.996
(0.000)
Serviceability ratio (base = (10,20])
(0,10] 0.605***
(0.030)		 0.618***
(0.030)		 0.586***
(0.036)		 0.659***
(0.055)		 0.550***
(0.112)		 1.016*
(0.005)
(20,30] 1.418***
(0.019)		 1.400***
(0.019)		 1.469***
(0.023)		 1.280***
(0.037)		 1.150
(0.075)		 1.008
(0.004)
(30,40] 1.803***
(0.024)		 1.768***
(0.024)		 1.923***
(0.028)		 1.497***
(0.048)		 1.367**
(0.101)		 0.988
(0.006)
40+ 1.926***
(0.033)		 1.883***
(0.033)		 2.015***
(0.039)		 1.731***
(0.064)		 1.550***
(0.145)		 0.934***
(0.009)
Lagged change in interest rates (bps; base = (–2,2])
<–25 0.774***
(0.034)		 0.771***
(0.034)		 0.770***
(0.041)		 0.764***
(0.062)		 0.718*
(0.125)		 0.801***
(0.008)
(–25,–2] 0.933*
(0.032)		 0.931*
(0.032)		 0.923*
(0.038)		 0.939
(0.059)		 0.782
(0.138)		 0.880***
(0.007)
(2,25] 1.032
(0.021)		 1.032
(0.021)		 1.015
(0.025)		 1.076
(0.042)		 1.121
(0.081)		 0.893***
(0.005)
25+ 1.188***
(0.035)		 1.189***
(0.035)		 1.179***
(0.042)		 1.196**
(0.065)		 1.233
(0.122)		 0.992
(0.007)
Repayment buffer (months; base = (1,6])
<1 2.322***
(0.019)		 2.306***
(0.019)		 2.293***
(0.023)		 2.371***
(0.036)		 2.309***
(0.076)		 0.983**
(0.004)
6+ 0.334***
(0.031)		 0.331***
(0.031)		 0.331***
(0.036)		 0.343***
(0.060)		 0.435***
(0.135)		 0.870***
(0.005)
Income <$180,000 0.931*
(0.023)		 0.972
(0.023)		 0.926*
(0.028)		 0.949
(0.045)		 0.840
(0.087)		 0.991
(0.004)
Loan type (base = principal and interest (P&I))
IO 0.786***
(0.020)		 0.771***
(0.020)		 0.760***
(0.024)		 0.869***
(0.039)		 1.033
(0.079)		 1.019***
(0.004)
Switched to IO 2.831***
(0.067)		 2.778***
(0.067)		 2.954***
(0.084)		 2.538***
(0.112)		 2.244**
(0.245)		 1.184***
(0.023)
Switched to P&I –
IO period expired		 1.944***
(0.048)		 1.925***
(0.048)		 1.913***
(0.059)		 2.022***
(0.086)		 2.350***
(0.151)		 1.330***
(0.016)
Switched to P&I – voluntary 0.298***
(0.190)		 0.293***
(0.190)		 0.279***
(0.225)		 0.360**
(0.356)		 0.645
(0.508)		 0.880***
(0.025)
Investor 0.674***
(0.019)		 0.681***
(0.019)		 0.653***
(0.022)		 0.739***
(0.037)		 0.728***
(0.075)		 0.915***
(0.004)
Self-employed 1.185***
(0.020)		 1.188***
(0.020)		 1.179***
(0.024)		 1.199***
(0.041)		 1.284
(0.094)		 0.866***
(0.005)
Multiple debtors 0.732***
(0.015)		 0.726***
(0.015)		 0.707***
(0.018)		 0.794***
(0.029)		 0.898
(0.062)		 1.086***
(0.003)
SEIFA 0.998***
(0.000)		 n/a 0.998***
(0.000)		 0.998***
(0.000)		 0.998
(0.001)		 1.000
(0.000)
Mining share of employment 1.018***
(0.002)		 1.016**
(0.002)		 1.046
(0.022)		 1.011
(0.003)		 1.015
(0.004)		 0.983***
(0.001)
Previous discharge 2.149***
(0.036)		 2.165***
(0.036)		 2.181***
(0.041)		 2.039***
(0.075)		 2.481***
(0.172)		 1.250***
(0.012)
Low documentation 2.013***
(0.042)		 2.008***
(0.042)		 2.058***
(0.047)		 1.869***
(0.088)		 2.133
(0.380)		 1.093***
(0.014)
Fixed rate 0.635***
(0.024)		 0.637***
(0.024)		 0.636***
(0.027)		 0.637***
(0.047)		 0.609***
(0.093)		 0.574***
(0.005)
Loan purpose (base = purchase)
Construction 1.070
(0.043)		 1.065
(0.043)		 1.268***
(0.051)		 0.720***
(0.083)		 0.787
(0.127)		 0.999
(0.010)
Further advance 1.478***
(0.104)		 1.480***
(0.104)		 1.324*
(0.132)		 1.785***
(0.167)		 2.577*
(0.319)		 1.220***
(0.020)
Refinance 1.636***
(0.016)		 1.639***
(0.016)		 1.699***
(0.019)		 1.464***
(0.031)		 1.434***
(0.065)		 1.185***
(0.003)
Broker-originated 1.012
(0.016)		 1.010
(0.016)		 0.999
(0.019)		 1.045
(0.032)		 0.966
(0.067)		 0.992
(0.003)
Region (base = capital city)
Major city 1.029
(0.030)		 1.083
(0.030)		 1.002
(0.034)		 0.910
(0.120)		 0.837
(0.533)		 1.006
(0.006)
Regional centre 1.069
(0.024)		 1.156***
(0.024)		 1.010
(0.032)		 1.077
(0.056)		 1.071
(0.104)		 0.885***
(0.006)
Remote 1.336***
(0.028)		 1.529***
(0.027)		 1.302***
(0.036)		 1.270*
(0.064)		 1.279
(0.132)		 0.826***
(0.008)
State fixed effects Yes Yes Yes Yes Yes Yes
Time fixed effects Yes Yes Yes Yes Yes Yes
Deal and issuer type Yes Yes Yes Yes Yes Yes
No of observations 12,370,383 12,370,842 10,442,510 1,927,873 216,898 12,370,383
No of events 19,625 19,626 14,350 5,275 1,236 427,589
Concordance ratio 0.787 0.786 0.784 0.775 0.736 0.634

Notes: ***, ** and * denote statistical significance at the 0.1, 1 and 5 per cent levels, respectively; standard errors are in parentheses

Sources: ABS; Author's calculations; CoreLogic data; RBA; Securitisation System
Table B2: Stage Two Results – Hazard Ratios
Competing risks, Cox proportional hazards model; all loans originated since 2013; time variable is months since entering 90+ day arrears
Dependent variable: Entered foreclosure Entered foreclosure Entered foreclosure Entered foreclosure Entered foreclosure Cured Full repayment
Sample: All loans All loans Non-mining Mining-exposed Negative equity All loans All loans
Model: Base Excl SEIFA Base Base Base Base Base
Indexed scheduled LVR (base = (60,70])
(0,30] 0.783 (0.127) 0.785 (0.127) 0.691* (0.168) 0.941 (0.215) n/a 1.175*** (0.035) 1.130* (0.048)
(30,40] 0.761 (0.138) 0.758 (0.138) 0.554** (0.182) 1.367 (0.221) n/a 1.151*** (0.035) 1.024 (0.049)
(40,50] 0.756* (0.118) 0.756* (0.118) 0.598** (0.149) 1.204 (0.201) n/a 1.106** (0.031) 1.095 (0.041)
(50,60] 0.902 (0.101) 0.901 (0.101) 0.882 (0.118) 0.921 (0.198) n/a 1.101** (0.028) 1.000 (0.038)
(70,80] 1.170 (0.084) 1.171 (0.084) 1.171 (0.103) 1.198 (0.149) n/a 1.001 (0.026) 0.922 (0.037)
(80,90] 1.688*** (0.085) 1.690*** (0.085) 1.850*** (0.112) 1.514** (0.143) n/a 0.967 (0.030) 0.818*** (0.044)
(90,100] 2.097*** (0.095) 2.098*** (0.095) 2.540*** (0.142) 1.772*** (0.147) n/a 0.942 (0.040) 0.679*** (0.063)
(100,110] 2.515*** (0.107) 2.509*** (0.107) 3.919*** (0.196) 2.068*** (0.156) n/a 0.807*** (0.054) 0.471*** (0.098)
(110,120] 3.261*** (0.130) 3.248*** (0.130) 5.011*** (0.326) 2.698*** (0.174) 1.321* (0.125) 0.831* (0.086) 0.687** (0.132)
(120,150] 3.443*** (0.129) 3.404*** (0.129) 8.596*** (0.305) 2.874*** (0.173) 1.582** (0.126) 0.818* (0.088) 0.581* (0.151)
(150,200] 4.604*** (0.155) 4.535*** (0.155) 1.970 (1.011) 4.025*** (0.193) 1.988*** (0.167) 0.434*** (0.178) 0.927 (0.201)
200+ 7.542*** (0.189) 7.515*** (0.189) n/a 5.380*** (0.231) 2.795*** (0.209) 0.276*** (0.323) 1.957*** (0.193)
Original LVR (base = (60,80])
(0,60] 0.923 (0.083) 0.919 (0.083) 0.956 (0.123) 0.847 (0.116) 0.849 (0.258) 0.957 (0.025) 1.048 (0.034)
80+ 1.000 (0.052) 1.002 (0.051) 0.967 (0.078) 1.045 (0.072) 0.988 (0.120) 0.945** (0.020) 1.053 (0.028)
Turnover ratio 0.921*** (0.019) 0.924*** (0.019) 0.902** (0.031) 0.977 (0.042) 1.040 (0.047) 1.007 (0.007) 1.074*** (0.010)
Unemployment rate 1.104 (0.050) 1.128* (0.048) 0.831 (0.142) 1.183* (0.076) 1.036 (0.124) 0.996 (0.019) 0.927* (0.032)
Unemployment rate^2 0.998 (0.003) 0.997 (0.003) 1.015 (0.009) 0.994 (0.004) 1.000 (0.006) 1.001 (0.001) 1.003 (0.002)
Serviceability ratio (base = (10,20])
(0,10] 1.172 (0.085) 1.179 (0.085) 1.317 (0.132) 1.151 (0.112) 1.042 (0.184) 1.097* (0.036) 0.987 (0.051)
(20,30] 0.828* (0.065) 0.823* (0.065) 0.786* (0.096) 0.869 (0.090) 1.036 (0.140) 0.985 (0.023) 1.030 (0.033)
(30,40] 0.817 (0.089) 0.814* (0.089) 0.753* (0.128) 0.887 (0.127) 1.141 (0.192) 0.994 (0.031) 1.100* (0.043)
40+ 0.891 (0.112) 0.881 (0.111) 0.969 (0.172) 0.912 (0.148) 1.178 (0.239) 0.988 (0.043) 0.962 (0.061)
Income <$180,000 0.890 (0.075) 0.901 (0.074) 0.825 (0.121) 0.900 (0.097) 0.675 (0.141) 1.083* (0.031) 0.940 (0.041)
Loan type (base =P&I)
IO 1.198** (0.055) 1.193** (0.055) 1.068 (0.086) 1.286** (0.074) 1.201 (0.110) 1.081** (0.021) 1.012 (0.031)
Switched to P&I – IO period expired 1.026 (0.095) 1.025 (0.095) 0.817 (0.165) 1.121 (0.118) 0.863 (0.164) 1.001 (0.038) 1.109 (0.051)
Investor 1.334*** (0.050) 1.337*** (0.050) 1.481*** (0.074) 1.219* (0.070) 1.235 (0.108) 1.000 (0.020) 1.096** (0.027)
Self-employed 1.062 (0.054) 1.059 (0.054) 1.112 (0.079) 0.990 (0.076) 0.924 (0.122) 0.990 (0.019) 1.151*** (0.026)
Multiple debtors 0.766*** (0.043) 0.766*** (0.043) 0.641*** (0.064) 0.889 (0.058) 1.430*** (0.093) 1.041* (0.015) 1.152*** (0.022)
SEIFA 0.999 (0.000) n/a 0.999 (0.001) 0.999 (0.001) 1.000 (0.001) 1.001*** (0.000) 1.001*** (0.000)
Mining share of employment 1.000 (0.003) 0.999 (0.003) 0.901 (0.076) 1.004 (0.004) 0.993 (0.006) 0.995 (0.002) 0.992 (0.004)
Previous discharge 0.983 (0.127) 0.984 (0.127) 1.235 (0.157) 0.627* (0.226) 0.710 (0.434) 0.709*** (0.051) 0.931 (0.064)
Restructuring arrangements 0.364*** (0.084) 0.363*** (0.084) 0.336*** (0.120) 0.388*** (0.121) 0.554** (0.184) 1.190*** (0.022) 0.860*** (0.032)
Low documentation 1.083 (0.099) 1.077 (0.099) 1.000 (0.134) 1.193 (0.149) 1.448 (0.352) 0.768*** (0.038) 0.891 (0.049)
Fixed rate 0.864 (0.084) 0.863 (0.084) 0.853 (0.126) 0.885 (0.113) 0.794 (0.178) 1.016 (0.027) 0.849*** (0.041)
Loan purpose (base = purchase)
Construction 1.145 (0.100) 1.142 (0.100) 1.556** (0.140) 0.919 (0.145) 0.850 (0.206) 0.896** (0.042) 0.857** (0.062)
Further advance 0.793 (0.243) 0.791 (0.243) 0.531 (0.455) 0.876 (0.294) 0.826 (0.425) 0.902 (0.076) 1.033 (0.094)
Refinance 1.007 (0.047) 1.007 (0.047) 1.088 (0.070) 0.946 (0.065) 0.931 (0.106) 1.001 (0.017) 1.039 (0.024)
Broker-originated 1.192** (0.047) 1.192** (0.047) 1.216* (0.070) 1.183* (0.064) 1.124 (0.098) 1.058** (0.016) 0.791*** (0.024)
Region (base = capital city)
Major city 1.325* (0.107) 1.330* (0.107) 1.401* (0.118) 1.644 (0.419) 0.696 (0.801) 0.986 (0.032) 0.939 (0.042)
Regional centre 1.568*** (0.061) 1.588*** (0.060) 1.280* (0.102) 1.714*** (0.105) 1.675** (0.179) 1.038 (0.024) 0.941 (0.035)
Remote 1.556*** (0.073) 1.618*** (0.068) 1.757*** (0.105) 1.501** (0.127) 1.386 (0.215) 1.040 (0.027) 0.742*** (0.043)
State fixed effects Yes Yes Yes Yes Yes Yes Yes
Origination year fixed effects Yes Yes Yes Yes Yes Yes Yes
Time fixed effects Yes Yes Yes Yes Yes Yes Yes
Deal and issuer type Yes Yes Yes Yes Yes Yes Yes
No of observations 42,136 42,141 30,401 11,735 2,796 42,136 42,136
No of events 2,388 2,389 1,092 1,296 572 18,187 9,016
Concordance ratio 0.791 0.791 0.787 0.756 0.732 0.579 0.634

Notes: ***, ** and * denote statistical significance at the 0.1, 1 and 5 per cent levels, respectively; standard errors are in parentheses

Sources: ABS; Author's calculations; CoreLogic data; RBA; Securitisation System