The performance of Australian Residential Mortgage-Backed Securities (RMBS) has improved significantly over Q3 2012, according to Fitch Ratings' Dinkum Index, which tracks RMBS transactions.
An environment of low interest rates, stable house prices and living costs and low unemployment have led to a decrease in +30 days arrears, down from 1.54 per cent in Q2 2012 to 1.36 per cent in Q3 2012.
"As expected, the two interest rate cuts in Q2 2012 have given borrowers additional relief," said Fitch Ratings analyst Hai Duong Le.
"Fitch expects the current low interest rate environment will positively affect serviceability and offset some of the seasonal Christmas and holiday spending," he added. "This is despite the fact that Australian lenders have not passed on the full benefit of recent rate cuts."
Meanwhile, the Dinkum Low-Doc Index improved from 7.19 per cent in Q2 2012 to 6.98 per cent in Q3 2012, with low-doc arrears averaging at approximately 5x of full doc loans at end-September 2012, up from an average of 4.5x higher over the previous 24 months.
These figures indicate that "self-employed borrowers are experiencing more financial difficulties curing their arrears than salaried employees," the report stated.
"Low-doc borrowers have historically taken longer to adjust their spending and cure their delinquency status given the nature of cash flow in this sector and Fitch believes this will continue," it said.
The report also indicated that Australian delinquency rates remain low in comparison to comparable markets.
