Loan defaults to rise: Fitch

Loan defaults are expected to rise over the coming year as interest rates return to more neutral levels and the government stimulus measures are progressively wound back.

According to Fitch Ratings semi-annual report on the major banks, impaired assets rose significantly during 2009, at a time of considerable fiscal stimulus and emergency low monetary policy settings.

You’re out of free articles for this month

Username or Email

Password Forgot password?

Keep me signed in on this device.

First Name

Last Name

Mobile

Organisation Type

By becoming a member, I agree to receive information and promotional messages from Real Estate Business. I can opt out of these communications at any time. For more information, please visit our Privacy Statement.

Need help signing up? Visit the Help Centre.

Tim Roche, director in Fitch's Financial Institutions Group, said as the interest rate cycle turns, with three increases in the official cash rate towards the end of 2009, highly geared Australian households could come under pressure, affecting economic activity and asset quality.

But even with an elevation in the amount of gross impaired loans, Mr Roche said Australia’s loans remained relatively robust in comparison to its off-shore peers.

Australian banks also have considerable capacity to withstand further loan impairments because they have generated higher operating profits and increased loan loss reserves, according to Fitch.

oan defaults are expected to rise over the coming year as interest rates return to more neutral levels and the government stimulus measures are progressively wound back.