Via S&P:
Arrears on the mortgages underlying Australian residential mortgage-backed securities (RMBS) increased marginally during the second quarter of 2018, according to S&P Global Ratings’ latest edition of “RMBS Performance Watch: Australia.”
Prime mortgage arrears have averaged around 1.37% for 2018. They were 1.38% as of June 2018. While our expectation is for arrears to continue to increase, given softening property prices, rising interest rates, and tougher refinancing conditions (for some borrowers), we expect the increase to be modest. Offsetting these headwinds is improved refinancing prospects for many borrowers as lenders continue to compete for borrowers of a good credit quality. Around 70% of loans in the RMBS sector are to owner-occupiers, 80% of loans are principal-and-interest loans, and around 72% of loans have a loan-to-value ratio of 75% or less. Credit collateral is therefore relatively strong and likely to weather some deterioration in key macroeconomic variables.
