Just in, arrears on Australian prime residential mortgage-backed securities (RMBS) rose by 25% in the March quarter and are approaching their historical high reached in January 2009.
Loans underlying Australian prime residential mortgage-backed securities that are greater-than-30 days in arrears jumped to 1.81 per cent in March 2011, from 1.44 per cent in December 2010.
According to a report published by Standard & Poor’s Ratings Services, this 25 per cent increase in arrears brings the level closer to the historical high of 1.84 per cent experienced in January 2009.
Subprime RMBS arrears rose by 103 basis points to 11.22 per cent during the same period.
“Arrears levels typically peak early in the year following Christmas spending before easing in March. However, two exceptions from the trend have occurred since the SPIN was recorded,” Standard & Poor’s credit analyst Vera Chaplin said.
“With arrears at 1.81 per cent, we are observing the rising trend repeated in March 2011, but at a higher starting level than in March 2008. The disruption to borrowers’ debt serviceability caused by the extreme flood and cyclone events, combined with higher cost of living and mortgage rates, have contributed to elevated arrears in Q1 2011. And with interest rates expected to remain at current levels or higher, we believe arrears could surpass the current peak, until a subsequent boost in economic activity occurs as the repair and replacement of damaged assets gets underway.”