Fitch: Australian Mortgage Arrears Rebound, but Remain Low

(The following statement was released by the rating agency)Link to Fitch Ratings' Report: Mortgage Market Index - The Dinkum RMBS Index - 1Q16https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884957SYDNEY, July 20 (Fitch) Australian mortgage arrears increased 16bp to 1.11% in 1Q16, due to seasonal Christmas spending, rising standard variable rates and a low real-wage growth, but remain low compared with the 1.75% peak in March 2011, says Fitch Ratings. The agency expects arrears to fall over the next two quarters once the effect of Christmas spending fades and the May 2016 interest-rate cut starts benefiting borrowers.The 1Q16 arrears are the lowest in a first quarter in the previous decade, despite the seasonal increase being the highest in five years, indicating improved overall performance yoy. In addition, the annualised residential mortgage-backed sector loss-rate - the ultimate performance indicator - has been falling consistently since 1Q13 to 0.02% in 1Q16. Fitch says losses remain extremely low thanks to strong house-price appreciation and low default rates.Fitch says the strong housing market, low unemployment-rate and low-interest-rate environment create favourable conditions for mortgage performance, but a sudden change in employment conditions or negative real-wage growth poses a major threat. Recently tightened lending standards may have lowered households' capacity to borrow, but Fitch believes the standards increase mortgage market stability should the economy change. Self-employed borrowers continue to experience financial difficulties, despite positive serviceability, and the move away from the low-doc market by many lenders has benefited residential mortgage-backed sector performance.Fitch's Dinkum RMBS Index tracks arrears and performance of mortgages underlying Australian residential mortgage-backed securities (RMBS). The full report, Mortgage Market Index - The Dinkum RMBS Index - 1Q16, includes current and historic index reference data in Excel-form and is available at www.fitchratings.com or by clicking the link in this media release. Contacts:James ZanesiDirector+612 8256 0306Fitch Australia Pty Ltd Level 15, 77 King Street, Sydney NSW 2000 AustraliaHai Duong LeAssociate Director+612 8256 0358Natasha VojvodicSenior DirectorHead of Australian and New Zealand Structured Finance+612 8256 0350Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@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.