The RBA housing files

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Yesterday the RBA released a set of documents under FOI ( h/t Mav ) containing reports and briefs relating to credit standards in housing lending, residential impaired assets, non-performing housing loans and arrears, applications for property possession and trends in housing prices, between 1 January and 16 August 2011. The FOI comes in three parts (links below) and contains much of the same information that I have previously analysed as part of the RBA’s Financial stability reports and statements of monetary policy.

Overall the documents suggest that, just like the polished public versions, the RBA is quite satisfied with the financial stability of housing market. But there are a couple of fairly interesting e-mails contained with the documents which are worth highlighting because you don’t normally get access to this sort of unpolished information from the RBA.

There is a trail of e-mails starting at document 43 where members of the financial stability department discuss a JP morgan report mentioned in this AFR article. The conversation focusses on the differing opinions about the strength of the 2009 cohort which is something I have discussed previously, and I must admit I side with the AFR article in my concerns.

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However, probably the most interesting e-mail of all that I have found is the one below, because I am not sure all of the details made their way into the latest financial stability report.

LOMAS, Phil

From: JOHNSON, Robert

Sent: Monday, 18 July 2011 18:06

To: Notes policy groups

Subject: Securitised housing loan arrears – May 2011 [SEC=UNCLASSIFIED]

Key points:

  • Arrears rates on securitised housing loans continued to increase in May. The 90+ days arrears rate is now around 20 basis points higher than at the end of 2010 and only 3 basis points below its peak in early 2009. Seasonal factors are only a small contributor to the recent increase, which is also evident when self‐securitised loans are included in the pool.
  • Although the arrears rate on fixed‐rate loans has trended up since the end of 2007, the increase in the arrears rate over 2011 has been much sharper for variable‐rate loans. This suggests that interest rates may be a key factor behind the recent increase in arrears rate. However, loans made since 2009 have performed relatively well given their seasoning, reflecting the tightening in lending standards in late 2008 and early 2009.
  • The 90+ days arrears rate on low‐doc loans, which now account for less than 8 per cent of the prime securitised mortgage pool, remains around five times the arrears rate on full‐doc prime loans.
  • The 90+ days arrears rate rose in all states in May, with the exception of Western Australia where it moderated by 1 basis point. The increase was largest in Queensland, taking the cumulative increase in its arrears rate to 32 basis points since the start of the year. Queensland now has the second highest arrears rate after New South Wales. Some of this increase likely reflects the recent natural disasters in this state.

For more information, please see D11/134402

Rob Johnson | Senior Analyst | Financial Stability Department RESERVE BANK OF AUSTRALIA | 65 Martin Place, Sydney NSW 2000 p: +61 2 9551 8546 | f: +61 2 9551 8052 | w: www.rba.gov.au

There is quite a lot in there including some charts I haven’t seen before in the third document set. Let me know if you see something interesting.

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