Fitch: Low Rates, Higher Competition Narrow Gap in Australian Lenders' Mortgage Arrears

(The following statement was released by the rating agency)Link to Fitch Ratings' Report: APAC Structured Finance Chart of the Month – March 2016https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879548SYDNEY, March 30 (Fitch) Mortgage performance across lenders in Australia has converged over the last two years as a result of low interest rates, increasing competition and tighter lending standards, Fitch Ratings says in a new report. Smaller authorised deposit-taking institutions (ADIs) continue to be the best performing lenders due to conservative underwriting and geographical focus, with arrears of around 0.5% in 2015. Mortgage performance of the Big 4 banks and other ADIs were stable at 0.9% and 1.2%, respectively.Recent standardisation of serviceability tests, dissipation of riskier products, such as low-documentation loans, and changes in investment loan treatment have fed competition among ADIs, especially in the owner-occupier segment. This led to an overall fall in arrears and a convergence of mortgage performance, particularly between non-ADIs and other ADIs. Arrears for non-ADIs, which have been historically 2-3 times higher than those of ADIs, have averaged 1.25% since January 2014, only 5bp above that of other ADIs.An interest rate hike may highlight borrowers that are more susceptible to interest-rate changes and may result in a divergence of mortgage performance between non-ADI and ADI lenders.The full report, which is part of Fitch's "Asia-Pacific Structured Finance Chart of the Month" series that highlights topical issues in the region, can be found at www.fitchratings.com or by clicking the link in this media release.Contacts:James ZanesiDirectorStructured Finance+612 8256 0306Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney, NSW 2000Natasha VojvodicSenior DirectorStructured Finance+612 8256 0350Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: leni.vu@fitchratings.com.Additional information is available at www.fitchratings.comALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.