Spiralling average loan sizes and LVRs over the last three years could spell trouble for lenders, Moody’s reported yesterday.
Moody’s Investor Services Trends in Australian RMBS Collateral: 2004-2007 report identified some deterioration in the performance of Australian residential loans.
It highlighted NSW and specifically South-western Sydney as the main contributors.
“There has been a gradual shift to higher LVRs with the 2007 origination vintage including a significant percentage of loans with an LVR above 95 per cent,” Moody’s assistant vice president and report author Ilya Serov said.
Mr Serov said the increase in higher LVRs was a concern because of the high correlation between delinquency and LVRs.
Moody’s however did believe that the risk to the industry will be mitigated by lower loan volumes from the non-bank sector.
“In the wake of the global credit crisis, lenders, especially in the non-bank space are finding it difficult to access funding… As a result, we see some of the trends towards higher LVRs and looser underwriting reversing in the short-term as origination is cut back,” said Mr Serov.
Published: 18-06-08
