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Arrears on loans underlying Australian prime residential mortgage-backed securities (RMBSs) fell by nine basis points to 1.33 per cent in April 2013.
According to Standard & Poor’s Ratings Services, total prime RMBS arrears fell to $110.1 billion.
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Subprime RMBS arrears recorded a significant decline in April, falling 1.71 percentage points to 5.65 per cent.
There was a substantial increase in subprime RMBSs outstanding during the month, rising to $2.77 billion from $1.85 billion in March.
Three new subprime RMBS transactions were issued during the month, contributing to the increase in amounts outstanding and to a decrease in loans in arrears with newer loan portfolios.
Speaking about the results, Standard & Poor’s credit analyst Narelle Coneybeare said there tends to be a decline in arrears at this time of the year as Australians don’t have Christmas spending to deal with.
“We expect to see further declines in coming months as the May interest rate reduction starts to be felt," Ms Coneybeare said.
"The decrease in arrears in the subprime and low-doc sectors was greater than we have recorded for some time. If the trend is sustained, it would indicate some easing for borrowers in these sectors of the market.
"Meanwhile, we see the recent increase in the unemployment rate as a risk to housing loan performance, which may mitigate the impact of interest rate cuts in coming months, particularly if unemployment continues on an upward trend.”
