The performance of Australian residential mortgage-backed securities deteriorated over the first quarter of 2017, Moody’s Investors Service has reported.
Acknowledging that increased delinquencies is a “common phenomenon” in the first quarter due to holiday spending at the end of the year, Moody’s reported an increase in delinquency rates for “most Australian prime RMBS issuer groups” in the first three months of the year leading up to 31 March.
Alena Chen, Moody's vice president and senior analyst commented: "The 30+ day delinquency rate for prime RMBS rose to 1.65 per cent at 31 March 2017 from 1.55 per cent at 31 December 2016 and 1.49 per cent at 31 March 2016.”
"Delinquency rates rose for most Australian prime RMBS issuer groups during Q1 2017, except regional authorised deposit-taking institutions," Ms Chen added.
According to Moody’s, the 30+ day delinquency rate for non-authorised deposit-taking institutions was highest, growing from 2.70 per cent at 31 December 2016 to 2.89 per cent at 31 March 2017. This number, however, is down from the 2.95 per cent for the quarter ending 31 March 2016.
The figures from Moody’s, released in its quarterly Australian RMBS Indices, also report that the 30+ day delinquency rate for major bank issuers grew to 1.67 per cent at the end of the first quarter, up from 1.53 per cent at December 2016 and 1.44 per cent in the first quarter of 2016.
For other authorised deposit-taking institutions (ADIs), the delinquency rate was the lowest among all issuer groups, at 0.66 per cent. However, this figure was still higher than the 0.59 per cent reported at 31 December 2016 and the 0.62 per cent of 31 March last year.
Moody’s revealed that as at 31 March 2017, the total repayment rate for prime RMBS was 23.65 per cent, lower than the 12-month average of 24.81 per cent. Australian non-conforming RMBS delinquency rates saw an increase to 5.18 per cent, compared to 3.73 per cent at 31 December last year.
Due to weakened economic conditions in mining reliant states together with rising underemployment, weak wage growth and a “less favourable” housing market, Moody’s predicts a continuation of Australian prime RMBS delinquencies for the remainder of the year.
Despite this, a “substantial build-up” of home equity across most capital cities in recent years should see losses remain low; home prices increased by 12.94 per cent across Australia’s major cities in a year-on-year comparison.
[Related: Non-banks see biggest improvement in arrears]