Fitch: Australian Mortgage Arrears Stay Near Record Lows

(The following statement was released by the rating agency)Link to Fitch Ratings' Report: Mortgage Market Index- The Dinkum RMBS Indexhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880061SYDNEY, April 18 (Fitch) Australian mortgage arrears have reached the lowest fourth quarter level in 11 years after declining 20bp year-on-year (yoy) to 0.95% in the quarter ended December 2015, Fitch Ratings says in a report released today. The level of arrears in 4Q15 reflected strong house price growth, low unemployment, low standard variable rates and low inflation. Self-employed borrowers continue to experience financial difficulties despite positive serviceability factors as indicated by the Low-doc Dinkum Index, which recorded a 32bp increase in 30+ days arrears to 7.29% in 4Q15. The annualised loss rate remained low in 4Q15 at 0.02%, unchanged for the third quarter in a row. Fitch expects an uptick in losses over 2016 as property price growth moderates. In the year to March 2016, property price growth in the combined capital cities was 6.4%, slowing from the double-digit growth experienced over much of 2H15. Losses are likely to remain limited, despite the likely slowdown in property price growth, because of tighter serviceability assessments recommended by the Australian Prudential (LON:PRU) Regulation Authority and the Australian Securities & Investments Commission. The introduction of measures, such as interest-rate floors, means borrowers should have more buffers to withstand increases in interest rates and unemployment, and a slowdown in the housing market. The changes to underwriting standards are positive for holders of newer vintage RMBS transactions, especially in the current low-interest-rate and high house price environment that has fuelled household borrowing.Fitch's Dinkum RMBS Index tracks the arrears and performance of the mortgages underlying Australian residential mortgage-backed securities (RMBS).Current and historic Dinkum Index data is available in Excel form for reference through the full report entitled, 'The Dinkum RMBS Index - 4Q15', available at www.fitchratings.com, or by clicking the link in this media release. Contacts:Katie BrookesAnalyst+612 8256 0364Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney, NSW 2000, Australia.James ZanesiDirector+612 8256 0306Natasha 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.