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Saturday, 5-Oct-2013 10:23 Email | Share | Bookmark
Aussie Low Doc Loan Defaults At Record Levels

Record-Low Rates Keep Australia Loan Arrears Stable, Fitch Says

But Moody's Investors Service noted that the overall level of defaults and personal bankruptcy was still relatively low, and that Australia's non-conforming loan sector does not resemble the troubled US sub-prime sector. Moody's found that during the second quarter of calendar 2007, average non-conforming residential mortgage backed security delinquencies greater than 90 days past due rose to about 6.5 per cent, from 5.97 per cent in the 2006 first half and 4.63 in 2005. "Delinquency rates have trended upwards for the past 18 months as a result of rising interest rates, riskier trends in mortgage origination, and high levels of household indebtedness," Moody's analyst Ilya Serov said. She said the impact of a 25 basis point rise in the official cash rate to 6.5 per cent in August by the Reserve Bank of Australia was yet to play out. "There is a natural lag between rate rises and changes in borrower behaviour and, as such, we expect the negative performance trend to continue," Ms Serov said. However, she said record low unemployment was keeping overall delinquencies at historical lows. <br>For the original version including any supplementary images or video, visit

Low-doc loan market too juicy for the big banks

However, one of the banks could buy a non-conforming lender and keep it operating under a separate brand. For the moment, the banks are content to build up their share of the low-doc market. Macquarie Research analyst William Ammentorp says the risks involved in low-doc lending are manageable. He cites research by Bluestone Mortgages showing that a high number of self-employed borrowers live in the wealthier suburbs of Sydney and Melbourne, including Vaucluse, Manly and Brighton. The big banks control the risk by requiring borrowers to take out no doc loans for business Gold Coast mortgage insurance, or to contribute a certain amount of equity. NAB requires 40 per cent equity in a low-doc loan and has capped home loans at $1.5 million, and business loans at $750,000. <br>For the original version including any supplementary images or video, visit

The proportion of prime home loans between 30 and 59 days late was at 0.59 percent, the lowest post-Christmas level since March 2006, the ratings company said in a statement today. Mortgages more than 30 days late rose to 1.48 percent in the first three months of 2013 from 1.46 percent in the fourth quarter of 2012, it said. Australias macroeconomic environment will continue to remain stable in 2013 due to low levels of unemployment and strong gross domestic product, analysts led by Hai Duong Le in Sydney wrote in the report. Low interest rates will continue to assist borrowers serviceability and ease the debt burden. The Reserve Bank of Australia lowered borrowing costs by 2 percentage points since November 2011 to 2.75 percent, and the unemployment rate fell to 5.5 percent in May from 5.6 percent in April. Almost half of all borrowers surveyed by QBE Insurance Group Ltd. (QBE)s lenders mortgage insurance unit were able to get ahead on repayments last year, thanks to the central banks rate cuts, the company said this week. Self-employed borrowers are lagging others, with delinquencies rising to 7.57 percent in the quarter ending March 31 from 7.05 percent in the prior three months. <br>For the original version including any supplementary images or video, visit

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