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Arrears climb in October

Staff Reporter 1 minute read

Arrears on residential mortgage loans underlying Australian prime residential mortgage-backed securities (RMBS) rose slightly in October 2009, leading economists to believe that the improvement in RMBS has petered out.

According to a report by Standard & Poor’s Rating Services, arrears climbed from 1.25 per cent in September to 1.27 per cent in October, the first rise in eight months.

“Arrears might worsen, however, given the expected sluggish recovery of the economy and the impact on borrowers from the interest rate rises since October 2009 by the Reserve Bank of Australia. Borrowers of low-documentation loans (LoDoc) have shown a greater tendency to fall into arrears in the present economic environment, as shown by an increase in the LoDoc SPIN to 3.51% in October, from 3.37% in September,” Standard & Poor’s credit analyst Vera Chaplin said.

Subprime RMBS arrears declined to 11.20 per cent in October 2009, from 11.49 per cent in September; this is a further decrease of 29 basis points from the previous month, due to the reduction in arrears in the 61-to-90-days’ and greater-than-90 days' category.

Arrears climb in October
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