SYDNEY, Feb 1 (Reuters) - A slowing housing market and rising macroeconomic challenges will lead to increase in Australian mortgage delinquencies in 2016, Ratings agency Moody's Investors Service said on Monday.
Moody's said mortgage arrears of longer than 30 days rose between October and November 2015 in Australia, which coupled with a fall in national house prices seen in the fourth quarter of last year will mean delinquencies will rise during 2016.
"Strong housing market activity in both Sydney and Melbourne helped foster strong economic performance in the respective states of New South Wales and Victoria," said Alena Chen, assistant vice president at Moody's.
"But a slower pace of house price growth will mean a slowdown in economic activity and will contribute to a deterioration in mortgage performance in 2016."
Moody's said on Monday it expects credit costs to increase "moderately" for Australian banks as a deep downturn in the resources sector aggravates macroeconomic risks.
(Reporting by Colin Packham)