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Prime RMBS arrears on the rise

Staff Reporter 1 minute read

By: Staff Reporter

Arrears on residential mortgage loans underlying Australian prime residential mortgage-backed securitisation (RMBS) transactions have climbed in the first quarter.

According to a report released by Standard & Poor’s Ratings Services, arrears rose by 0.19 per cent to 1.44 per cent in the March quarter, while subprime RMBS arrears grew 0.67 per cent to 12.24 per cent.

Standard & Poor’s credit analyst Vera Chaplin attributed the increase in arrears to rising interest rates.

"While we observe that the six consecutive official rate rises by the Reserve Bank of Australia may have contributed to higher overall arrears levels, we believe any worsening impact on RMBS collateral performance due to factors such as increased interest rates would likely be moderate and temporary,” Ms Chaplin said.

“In our view, if interest rates continue to rise, some first-home buyers who entered the property market when interest rates were historically low, and self-employed borrowers whose cash flows are more sensitive to economic conditions and borrowing costs, are likely to be most affected. Nevertheless, we believe the overall impact on defaults and losses is likely to be low if property values are preserved.”

Prime RMBS arrears on the rise
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