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The level of arrears on low doc loans deteriorated slightly, highlighting the effect of the three successive rate hikes
Despite the delivery of three successive cash rate hikes in Q409, Australian mortgage delinquencies fluctuated between good and bad across the board.
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According to the Q409 Dinkum Index, delinquencies in the 30-59 day bracket remained constant or deteriorated, with the worst performers being non-conforming low-doc borrowers, where delinquencies increased by over 50 per cent.
Fitch’s Structured Finance RMBS team Associate Director Leanne Vallelonga said the increase in delinquencies for non-conforming borrowers was largely expected.
“Though non-conforming borrowers represent a small portion of the market, they were the first to be impacted by the increases in interest rates and further deterioration is expected,” she said.
However, it was not all bad news for mortgage delinquencies.
Prime/conforming delinquencies improved for the most part in Q409, with 30+ day arrears decreasing to 1.19 per cent from 1.21 per cent in Q309.
“This decrease can chiefly be attributed to the index constituent methodology, as there were five new transactions added, which helped in pulling the overall index lower. If these five deals were omitted, there would have been a slight increase in 30+ day arrears to 1.23 per cent in Q409 from 1.21 per cent in Q309,” Ms Vallelonga said.
Low-doc, both conforming and non-conforming, 30+ day arrears worsened in the quarter.
Non-conforming low-doc arrears deteriorated to 16.47 per cent from 15.59 per cent in Q309, with conforming low-doc arrears deteriorating to 4.82 per cent from 4.72 per cent in Q309.
According to Fitch, these increases are mainly due to rises in the 30-59 day buckets, where conforming low-doc arrears rose by 28 per cent from Q309 and non-conforming low-doc arrears rose by 50 per cent from Q309.
Improvements were seen across all 90+ day arrears categories, which Ms Vallelonga believes is due to the rebound in property prices during the latter half of 2009, improving lenders’ ability to sell properties.
