According to S&P Global Ratings’ latest arrears statistics, over 30-day delinquencies underlying Australia’s residential mortgage-backed securities (RMBS) fell from 1.32 per cent in October to 1.30 per cent in November.
The dip in arrears was triggered by an improvement in credit quality across five states and territories, including the resource states of Queensland, Western Australia and the Northern Territory.
The sharpest decline in arrears was recorded in the Northern Territory (17 bps), followed by South Australia and Tasmania (10 bps), Western Australia (3 bps) and Queensland (1 bps).
Such improvements were offset by a rise in RMBS delinquencies across NSW (3 bps), Victoria (3 bps) and the ACT (4 bps).
However, overall, arrears remain highest in Western Australia (2.76 per cent), followed by the Northern Territory (2.20 per cent), Queensland (1.64 per cent), South Australia (1.32 per cent), Victoria (1.21 per cent), NSW (1.18 per cent), Tasmania (1.01 per cent) and the ACT (0.95 per cent).
According to S&P, the overall decline in arrears over the month of November is in line with previous trends.
“Arrears typically stabilize or decline in the fourth quarter before rising in the first quarter, following Christmas and the summer holidays, then decline again in the second quarter,” S&P noted.
The ratings agency added that the ongoing drought and bushfire crisis could place upward pressure on arrears over the coming months.
“With the ongoing bushfires and prolonged drought affecting many parts of the country, arrears could remain elevated beyond the first quarter as debt-serviceability pressures surface in bushfire-affected areas, particularly those already impacted by drought,” S&P stated.
Meanwhile, non-conforming arrears increased overall in November, rising from 3.14 per cent to 3.17 per cent, which S&P attributed to “slowing economic conditions” that have a “greater effect on borrowers with greater cash-flow sensitivities” that make up a larger proportion of non-conforming transactions.