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ISCOVER
Staff Reporter
The number of Australian mortgages in arrears is likely to rise as a consequence of the Queensland floods.
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According to a new report by Standard & Poor’s Ratings Services, the large scale of the floods in Australia makes it likely that arrears levels in rated mortgage pools would rise. That said, the longer-term economic effects of the floods have yet to manifest fully, as such it is difficult to determine the impact on rated structured finance securities exposed to inundated areas.
"Moreover, government assistance, insurance cover, and the impact on a borrowers' income would determine whether flood-affected borrowers can continue to manage loan payments," Standard & Poor's credit analyst Kate Thomson said.
"If pressure were to increase, existing credit support and transaction structures in all asset classes would contain the impact of lower creditworthiness on current structured finance ratings to moderate levels."
Ms Thomson said in the asset-backed securitization sector, transactions backed by certain assets could also experience worsening credit quality.
Depending on borrowers' eventual financial position and the extent of damage, small-ticket commercial loan securitisations and auto loan-backed transactions could see some deterioration.
