By: Staff Reporter
Loan arrears on prime residential mortgage backed securitization (RMBS) hit a two year low over the December quarter, according to rating agency Standard & Poor’s.
The agency’s latest report found that RMBS loan arrears fell from 1.85 per cent in January last year to 1.35 per cent in the December 2009 quarter.
Meanwhile, subprime RMBS increased by 0.08 per cent to 11.57 over cent over the same period.
According to a statement by Standard & Poor’s, further arrears are expected on the back of future interest rate increases, as well as other economic factors.
“Some borrowers remain vulnerable to economic factors such as job losses, reduction in disposable income as a result of reduced work hours, and rising interest rates,” the statement read.
“Self-employed borrowers, who tend to have volatile incomes, and first home buyers that bought when interest rates were historically low, will be more sensitive to rising mortgage costs.”