Fitch Ratings says Australia’s mortgage arrears increased by 12bp qoq to 1.21% at end-1Q17, due to seasonal Christmas/holiday spending and possible difficulties faced by consumers because of low real-wage growth. The qoq increase in arrears from 4Q16 to 1Q17 was less than 1Q16 (16bp qoq to 1.10%).
The 30+ days arrears in 1Q17 were 11bp higher yoy, despite an improved economic environment and lower standard variable interest rates. Unemployment increased slightly by 2bp and real wage growth was low, but positive. Underemployment has been growing despite relatively stable unemployment.
Fitch Ratings expects arrears to fall in 2Q17 and 3Q17 after the holiday season due to the current low interest rate environment and decreasing unemployment.
Fitch-rated residential mortgage-backed securities transactions have continued to experience extremely low levels of realised losses since closing and an increasing lenders’ mortgage insurance (LMI) payment ratio since 4Q12. Excess spread was sufficient to cover principal shortfalls during 1Q17
