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Arrears on residential mortgage loans underlying prime residential mortgage-backed securitisation (RMBS) transactions have eased for the fifth consecutive month.
According to a report from Standard & Poor’s rating service, arrears fell to 1.44 per cent in the second quarter from a record high of 1.84 per cent in January 2009.
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In Q2 2009, total new issuance of Australian RMBS was $3 billion, with all transactions closed being wholly supported by the Australian Office of Financial Management program.
The subprime Standard & Poor’s Mortgage Performance Index (SPIN) has also recorded its lowest level since its peak at 17.09 per cent in January 2009.
It fell by a large single-quarter decline of 2.85 per cent to 13.61 per cent by end-Q2 2009, which is back at the levels seen before the impact of the global capital-market dislocation on the Australian securitisation market in mid-2007.
The report said that arrear levels tend to be higher immediately after Christmas before declining thereafter.
“We believe that a significant proportion of the arrears reduction is attributable to the support households received from the government's monetary and fiscal policy stimulus. With the economy showing signs of improvement, we believe that arrears could improve further and stabilise at a lower level before household budgets tighten due to Christmas expenses later in the year,” the report said.
“Nevertheless, key risks remain – including the likely shallow path of the economic recovery, continued rise in unemployment, and a greater-than-150 per cent household debt-to-income ratio--which could reverse this improving trend.”
