Mortgage arrears continue to rise

By Emma Ryan

31 March 2016

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A new report has revealed that the proportion of Australian housing loans in arrears has increased for prime and non-conforming residential mortgage-backed securities (RMBS) for the third consecutive month.

According to Standard & Poor’s (S&P) Performance Index (SPIN), arrears levels for prime RMBS increased to 1.07 per cent in January 2016 from 0.96 per cent in December 2015, while non-conforming RMBS loans in arrears increased to 4.91 per cent from 4.63 per cent a month prior.

Arrears for both full doc and low doc loans increased over the month to 1.02 per cent and 4.36 per cent respectively.

“In our observation, arrears levels tend to increase in December, January, and sometimes February reflecting seasonal fluctuations, particularly the impact of Christmas spending and the January sales period,” the S&P report said.

“We generally expect to see arrears levels start to trend down from their seasonal peaks by March, providing economic conditions remain relatively stable.”

Last month, S&P revealed that non-bank lenders recorded the lowest arrears level of all originator types at 0.70 per cent in December 2015, while regional banks had the highest arrears level at 1.74 per cent.

The major banks reported in December that arrears of more than 30 days increased by 27 per cent year-on-year, despite a rise in outstanding balances of more than 50 per cent during the period.