Loan arrears continue to fall

Loan arrears continue to fall

Posted on Thursday, July 25 2013 at 2:36 PM

The level of overdue repayments on loans tied to prime residential mortgage-backed securities (RMBS), a type of investment deriving cash flow from home finance debt, continues to fall.

Standard and Poor’s (SP) says arrears on loans underlying prime RMBS
decreased two basis points to 1.31 per cent in May, compared with a month

Subprime RMBS arrears fell 16 basis points to 5.57 per cent over the same
period, while low-documentation loan arrears decreased four points to 5.4 per

“This is the second month to record declines across both prime and subprime
sectors,” SP credit analyst Narelle Coneybeare says.

“The decrease in arrears in both the subprime and low-doc sectors was
small, however we’re seeing declines in the proportion of arrears greater than
90 days, indicating that the proportion of borrowers facing severe arrears is

RMBS investments took a battering in
Australia in the aftermath of the global financial crisis. It has continued its
slow recovery in recent years.

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