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In a sign that the Australian economy is beginning to stabilise, the nation’s delinquency rate has fallen from 10.39 per cent in the first quarter to 9 per cent in the second quarter.
Moody’s Investors Service said despite the recent reduction in delinquencies, 90 days past due delinquencies were unlikely to fall to historically low levels any time soon, primarily because of non-conforming borrowers.
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“Non-conforming borrowers continue to face difficulties in an uncertain economic environment," Moody's analyst Ryan Lu said.
The Australian non-conforming lending market is largely comprised of loan products falling outside the scope of lenders mortgage insurance.
Loans are considered non-conforming due to the presence of one or more risk features that are not acceptable to traditional prime lenders or mortgage insurers.
According to Moody’s, issuance volumes from the non-conforming RMBS sector will remain subdued throughout 2009 due to continued dislocation of the securitisation market, with property prices remaining the key driver of ultimate losses for such transactions.
