Arrears spike will continue: Moody's
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Adam Smith
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27/07/2011 3:00:00 AM
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Mortgage delinquencies are expected to rise in the coming decade, and Australian house prices may be unsustainable, Moody's has indicated.
The ratings agency has undertaken a review of the methodology by which it rates Australian RMBS following similar moves by Fitch's and S&P. Moody's senior credit officer Ilya Serov said the agency expects arrears and defaults to rise in Australia.
"Default and delinquency rates in the mortgage market are likely to be both variable and, in our view, on average higher over the coming decade than in the past," Serov commented.
Moody's said the sustainability of Australian house prices was in question, and stated that massive increases in value over the past decade were "only partially explained by fundamentals".
"We consider the possibility of major regional house price drops to be a material risk for the Australian market," Serov said.
The agency argued that high levels of mortgage debt pointed to vulnerability within the Australian financial system.
The review comes as ratings agency Fitch today changed Queensland's outlook from stable to negative. Fitch said the downgrade was due to the slow pace of the state's budgetary recovery.
Related stories:
Arrears uptick no cause for panic
Economy doing it tough, RBA concedes
Queensland worst for arrears
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