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Arrears are expected to surge in the coming months as the Reserve Bank continues to tighten rates, a new report has found.
According to Fitch Ratings Structured Finance Outlook for 2010, rates will continue to increase over the coming six months which could potentially affect the performance of mortgage backed assets.
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“The RBA’s tightening stance will add strain to debt burdens and put the brakes on accelerated household borrowing,” the report said.
“The residential housing market still remains characterised by a high household debt to disposable income ratio of over 150 per cent and household debt now constitutes a historical high of 20 per cent of household assets.”
And Australians have been slow to save as a way of reducing their debt.
“The rebuilding of households’ savings ratio back to 3 per cent to 5 per cent of disposable income, levels last seen during the property correction of 1997, to improve balance sheets in the presence of debt overhang has only occurred for three quarters, since the fourth quarter of 2008,” the report said.
