Soaring Sydney housing prices are encouraging those who are having trouble keeping up with their mortgage repayments to sell up.
Ratings agency Moody's has found the number of mortgages that were more than 30 days in arrears fell marginally to 1.34 per cent in the year to May.
NSW was the main driver for the nationwide fall, with every other state, except Tasmania, recording rises in mortgage delinquencies despite interest rates being at record lows.
The ratings agency said strong economic activity and soaring property prices in Sydney drove a 0.29 percentage point fall in mortgage delinquencies in NSW.
"When property prices are rising, borrowers at risk of arrears are more likely to be able to sell their houses quickly to fulfil their repayment obligations, thereby keeping delinquencies low," Moody's said in a report on Thursday.
"If the pace of house price growth slows in Sydney - or other regions where the property market has been performing strongly - we would expect mortgage delinquencies to increase over the long term."
The report showed that people in the mining states of Queenslanders and Western Australians had problems keeping up with home loan repayments over the 12 months to May.
The two states that benefited the most from the recent mining investment boom, are now suffering the most as resources companies slash staff because of plummeting commodity prices.
Moody's said the largest rise in delinquencies was in Fitzroy, an area in Queensland close to the Bowen Basin coal mining region.
The next worst was the Darling Downs-Maranoa region in southern Queensland near natural gas projects and coal mines, while in the WA town of Mandurah, which is in close proximity to several mines was the next worst.
Moody's said the states with higher mortgage delinquencies had not benefited from the same sort of hefty home price rices witnessed in Sydney.
Economic activity and wages growth in some of those states was also relatively soft.
NSW, TAS BUCK MORTGAGE DELINQUENCY TREND
* NT delinquencies up 0.18 pct pnts
* SA up 0.16 pct pnts
* WA up 0.12 pct pnts
* VIC up 0.08 pct pnts
* QLD up 0.05 pct pnts
* NSW down 0.29 percentage points
* TAS down 0.12 pct pnts
* ACT down 0.05 pct pnts
* Australia down 0.04 pct pnts
Source: Moody's
(Results are for between May 2015 and May 2014)
