By: Staff Reporter
Borrowers who maintained their mortgage repayments at higher rates during the Reserve Bank's easing phase have created a buffer that is likely to prevent delinquencies in the Residential Backed Mortgage Securities (RMBS) market, a study by Moody’s has found.
According to Moody’s, even if rates were to lift a further 75 basis points, it would still not have a significant impact on the rate of mortgage delinquencies in Australia’s mortgage securitisation market.
Moody’s senior analyst Arthur Karabatsos told the Australian Financial Review that higher interest rates and stricter lending requirements have softened the impact of the RBA’s tightened monetary policy.
“It is fair to say that most mortgage borrowers can absorb much greater upside in interest rates,” Mr Karabatsos said.
“Increased interest rates alone will not cause delinquencies to deteriorate to the point where you get downgrades,” he said.
Delinquency rates on prime RMBS issues more than 30 days overdue peaked at 1.63 per cent in January last year. This figure has since fallen to 1.1 per cent.
Historically, delinquency rates have ranged between 0.7 and 0.8 per cent.
The report also found that Moody’s expects the revival of securitisation to help balance out competition in the banking sector.