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Mortgage delinquencies are set to rise just as interest rates are expected to climb, global ratings agency Fitch has said.
According to a Fitch report released yesterday, home loans in arrears by more than 30 days increased across all borrower categories in the December 2009 quarter.
Non-conforming, low-doc borrowers were the worst affected category, with delinquencies increasing by more than 50 per cent.
"Though non-conforming borrowers represent a small portion of the market, as expected they were the first to be impacted by the increases in interest rates which took place in Q409. Further deterioration is expected," Fitch's Structured Finance RMBS team associate director Leanne Vallelonga said.
Further interest rate hikes, combined with continued global instability and the risk of rising unemployment in Australia, are expected to push arrears higher in 2010.
However, Fitch said it did not expect an excessive rise in arrears, nor any impact on the overall ratings of local RMBS transactions.
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