Arrears uptick no cause for panic
By
Adam Smith
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26/07/2011 4:00:00 AM
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Rising arrears are no cause for panic, BIS Shrapnel has claimed.
Standard & Poor's has noted a rise in 30-day arrears for loans backing Australian RMBS, while Fitch Ratings has predicted arrears will continue to grow. However, BIS Shrapnel managing director Robert Mellor has told the Australian Financial Review that rising arrears are not yet a cause for concern.
Mellor pointed to statistics indicating up to 2% of mortgages are in arrears in some states, but said this percentage was not significant.
"Compared to the rate of mortgage defaults, which are between four and five times higher than arrears, I struggle to believe such a small percentage has an impact on the market," he said.
S&P data shows arrears grew from 1.81% in March to 1.83% in April. Fitch Ratings has indicated it believes arrears will continue to rise over the coming 12 months. Mellor told the AFR that he believes a protracted period of interest rate stability could give delinquent borrowers time to adjust their finances.
Related stories:
Economy doing it tough, RBA concedes
Queensland worst for arrears
Aussie borrowers vulnerable to defaults: Fitch
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