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Moody's Investors Service says that its 30-day plus delinquency rate for Australian prime residential mortgage-backed securities (RMBS) remained stable at 1.2% in December 2014 compared to September 2014, and improved year-on-year from the 1.4% recorded in December 2013.
"The performance varied across issuers. At end-December 2014, the delinquency rate for the major banks was 1.0% and 0.8% for other authorised deposit-taking institutions," says Alena Chen, a Moody's Assistant Vice President and Analyst.
Chen was speaking on the release of Moody's quarterly Australian RMBS Indices: Q4 2014.
Meanwhile, the delinquency rate for regional authorised deposit-taking institutions (ADIs) was at 2.0%, while the rate was higher for non-ADIs at 3.0%.
The delinquency rate for RMBS deals comprising low-documentation loans increased to 4.8% in December 2014 from 4.3% in September 2014. On a year-on-year basis, this figure improved from the 4.2% recorded in December 2013.
Obligors for low-doc loans provide minimal proof of income at underwriting. Historically, they perform worse than obligors who provide full documentation. However, this performance differential was stable in 2014 at around 3% as both obligor groups benefit from the stable macroeconomic environment.
Furthermore, overall pre-lenders mortgage insurance (LMI) losses for Australian prime RMBS remained low. The worst performing vintage of 2004 incurred a loss of 56 basis points. In terms of issuer group, losses from 'other-ADIs' were the highest, with 76 basis points of loss incurred by the 2004 vintage.
To date, a majority of these losses have been covered by LMIs, with the residual losses covered by excess spread or the lender.
The total repayment rate was 26% as of end-December 2014, slightly higher than the average in 2014 and 2013.
The Australian prime RMBS performance outlook for 2015 remains stable, with delinquencies and losses expected to remain low.
"This view is underpinned by our economic forecasts for modest GDP growth of 1.5%-2.5%, a continuation of the low cash rate of around 2.0%-2.25%, and a broadly stable unemployment rate of 5.5%-6.5%," says Chen.
Australian GDP grew by 0.5% in Q4 2014, compared to 0.4% in Q3 2014. Seasonally adjusted, the unemployment level increased to 6.1% in December 2014 from 6.2% in September 2014, with both South Australia and Tasmania experiencing a particularly high 6.6% rate.
Home prices across the major cities increased 7.9% year-on-year for the period ended Q4 2014. Prices increased the most in Sydney, by 12.4%. Perth experienced the lowest growth, at 2.1%.
Subscribers can access the report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF399080.
