Smaller lenders see delinquencies rise

Simon Parker

The national delinquency rate for residential mortgage backed securities (RMBS) portfolios, which are mostly loans made by lenders outside the major banks, has increased to 1.67 per cent between March 2010 and June 2011, up from 1.36 per cent, a report by rating agency Moody’s has revealed.

A blog by RP Data said Moody’s annual Mortgage Delinquency Report revealed delinquencies increased “as consumer confidence dipped, property values fell and global economic conditions weakened.”

The report was based on the analysis of around $117.6 billion worth of mortgages, which are included in Moody’s-rated residential mortgage backed securities (RMBS) portfolios. RP Data said this represented about 10 per cent of Australian’s $1.1 trillion mortgage market and are considered a suitable proxy for market trends.

“It is important to note that the RMBS market is a small fraction of the overall mortgage market with the vast majority of home loans originated and maintained through bank funding,” RP Data said.  “In most instances RMBS are undertaken by second tier banks and building societies.  Nevertheless, the report does highlight some important trends.”

The report revealed there were 11 regions performing extremely poorly, led by Fairfield-Liverpool in Sydney’s southwest. This area remained the worst performing area in Australia, with 3.15 per cent of mortgages now beyond 30 days in their repayments. The NSW Central Coast came in second, followed by Queensland’s Gold Coast.

"Despite these figures clearly highlighting growth in delinquencies, the vast majority of regions (37) are performing satisfactorily or better," RP Data said.

NSW and Queensland made up for 10 of the 11 very poorly performing regions.

According to RP Data, the NSW result was due to weak property value growth conditions persistent since early 2004, despite strong growth recently, while in Queensland it reflected the extremely weak recent performance of coastal markets.

“Overall the report highlights the weakness currently occurring in the housing market however, it is important to note that it refers to only a small portion of the overall market and is reflective of loans occurring away from the big four banks,” RP Data said.

“In some instances, by no means all, these loans may have been offered to applicants that had been considered inappropriate for a home loan by the major banks.

“The report does echo broad trends however, given it is based on a sample of just 10 per cent of the market and loans originated away from the four major banks I suspect it may be overstating delinquency rates somewhat.  In saying this, I do believe the trend is correct with a greater number of mortgages falling delinquent.”

Simon Parker

The national delinquency rate for residential mortgage backed securities (RMBS) portfolios, which are mostly loans made by lenders outside the major banks, has increased to 1.67 per cent between March 2010 and June 2011, up from 1.36 per cent, a report by rating agency Moody’s has revealed.

A blog by RP Data said Moody’s annual Mortgage Delinquency Report revealed delinquencies increased “as consumer confidence dipped, property values fell and global economic conditions weakened.”

The report was based on the analysis of around $117.6 billion worth of mortgages, which are included in Moody’s-rated residential mortgage backed securities (RMBS) portfolios. RP Data said this represented about 10 per cent of Australian’s $1.1 trillion mortgage market and are considered a suitable proxy for market trends.

“It is important to note that the RMBS market is a small fraction of the overall mortgage market with the vast majority of home loans originated and maintained through bank funding,” RP Data said.  “In most instances RMBS are undertaken by second tier banks and building societies.  Nevertheless, the report does highlight some important trends.”

The report revealed there were 11 regions performing extremely poorly, led by Fairfield-Liverpool in Sydney’s southwest. This area remained the worst performing area in Australia, with 3.15 per cent of mortgages now beyond 30 days in their repayments. The NSW Central Coast came in second, followed by Queensland’s Gold Coast.

"Despite these figures clearly highlighting growth in delinquencies, the vast majority of regions (37) are performing satisfactorily or better," RP Data said.

NSW and Queensland made up for 10 of the 11 very poorly performing regions.

According to RP Data, the NSW result was due to weak property value growth conditions persistent since early 2004, despite strong growth recently, while in Queensland it reflected the extremely weak recent performance of coastal markets.

“Overall the report highlights the weakness currently occurring in the housing market however, it is important to note that it refers to only a small portion of the overall market and is reflective of loans occurring away from the big four banks,” RP Data said.

“In some instances, by no means all, these loans may have been offered to applicants that had been considered inappropriate for a home loan by the major banks.

“The report does echo broad trends however, given it is based on a sample of just 10 per cent of the market and loans originated away from the four major banks I suspect it may be overstating delinquency rates somewhat.  In saying this, I do believe the trend is correct with a greater number of mortgages falling delinquent.”

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