Mortgage arrears stable in December

From S&P:

The number of delinquent housing loans underlying Australian prime residential mortgage-backed securities was unchanged in December from November, according to a recent report by S&P Global Ratings. Arrears typically rise between November and April. Arrears in December 2016 were up 20% from the same month a year earlier, but the rate of increase has slowed in recent months. A total of 1.15% of the mortgages underlying Australian prime residential mortgage-backed securities (RMBS) were more than 30 days in arrears in December, as measured by Standard & Poor’s Performance Index (SPIN), according to the “RMBS Arrears Statistics: Australia” report. Arrears are still low at these levels, but it is interesting that prime arrears have increased by around 0.19% during the past 12 months, despite an around 0.40% reduction in standard variable rates. Mortgage arrears typically are sensitive to interest-rate movements because most loans underlying Australian RMBS transactions are variable rate. In recent months, however, there has been a divergence from this trend. Arrears movements were mixed among the originator types. Major banks was the only category that reported a fall in arrears, slipping to 1.12% in December from 1.14% in November, and arrears remained unchanged for nonbank originators, at 0.95%. Regional banks have the highest arrears of all originator types, at 1.92%, and the highest percentage of loans more than 90 days in arrears, at 0.85%. Nonbank financial institutions have the lowest number of loans more than 90 days in arrears, at 0.25%. Major banks recorded the largest year-on-year increase in mortgages that are more than 90 days in arrears, but at 0.59%, advanced-stage arrears remain low for this sector.

Expect new highs in H1 as the pot-Xmas squeeze arrives.