Mortgage arrears rates rise slightly in final quarter of 2012: Fitch

There was a small increase in the number of home loan borrowers more than one month behind in their mortgage repayments in the final quarter of 2012, according to the latest Fitch Dinkum Index.

The index monitors underlying Australian residential mortgage-backed securities – a form of funding where loans are bundled together and sold to institutional investors by lenders.

The percentage of loans between 30 and 59 days in arrears increased by 20 basis points in the December quarter from 0.49% to 0.69%, despite the RBA rate cut in October 2012.

This led to a marginal increase in 30+ delinquencies in the Australian prime RMBS sector to 1.46% of mortgages in the fourth quarter of 2012 compared with a rate 1.36% in the third quarter of 2012.


“The stable environment and the significant number of [LMI] claims in the fourth quarter of 2012 have helped reduce 90 plus days arrears by 8 basis points to 0.55%, the lowest level since December 2010,” says Fitch.

With a stable outlook on Australian macro-economic conditions, Fitch expects arrears rates in 2013 to remain similar to what they were 2012.

Fitch expects a seasonal increase in arrears due to holiday and Christmas spending to be evident in the first quarter of 2013, although this will be partially mitigated by the December 2012 cash rate cut and some continuing impact from the October 2012 decrease.

“Australia’s economic conditions remain stable, as over the past 20 years. Low interest rates and over 20 years of economic growth have resulted in a rise in real estate values and a significant build-up in household debt,” says Fitch.

“An economic downturn, coupled with high unemployment and/or rising interest rates, would affect the ability of individuals to service debt.”

Low-doc arrears rates increased from 1.66% to 1.72% for borrowers more than a month behind on mortgage repayments.

Around 90% of securitised home loans are prime, full-doc mortgages with around 7% prime low-doc and the remainder non-conforming loans.

The Dinkum index is compiled by Hai Duong Le, James Zanesi, and Natasha Vojvodic.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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