Australia’s mortgage arrears remained stable in 2Q17, with a 4bp decrease to 1.17% from the previous quarter, reflecting Fitch Ratings‘ expected seasonal recovery from Christmas and holiday spending.
The 30+ days arrears were 3bp higher from 2Q16, despite Australia’s improved economic environment and lower standard variable interest rates for owner occupied lending.
Unemployment improved by 20bp and real wage growth was low, but positive. Underemployment also improved by 20bp, reflecting a proportional increase of full-time employment during the quarter.
Repayment rates have decreased as borrowers recover from Christmas and holiday spending. The Dinkum RMBS Index borrower payment rate fell to 21.2% at end-2Q17, from 21.9% in the previous quarter. The conditional prepayment rate also dropped qoq to 19.1%, from 19.8%.
Losses experienced after the sale of collateral property remained extremely low, with lenders’ mortgage insurance payments and/or excess spread sufficient to cover principal shortfalls in all transactions during the quarter.
Fitch’s Dinkum RMBS Index tracks arrears and performance of mortgages underlying Australian residential mortgage-backed securities.