A global ratings company believes a stagnating housing market and an non-competitive lending environment are major threats to Australian mortgage payment rates.
A new report from Fitch Ratings to monitor Australian repayment rates in securitised prime mortgages show Australians have historically been good at paying back the debt quickly but this is easing.
Over the past decade, Australian RMBS prepayment rates have ranged from 15% to 25%. Overseas, this rate has decreased to 5%, compared to 15% to 20% prior to the GFC.
As of March, the Fitch Dinkum Borrower Payment Rate Index, which tracks the average repayment rate in static mortgage pools of public Australian Prime RMBS, was 22.2%.
This is 350bp higher than historic lows in March 2011, as a result of the strong housing market and competitive lending environment, the report’s lead author James Zanesi said.
However, the average increase in voluntary home loan repayments has been modest and had only increased slightly since the GFC.
The research found the average borrower is paying about 1.5 to 2% more of their loan principal than required each year.
While the Reserve Bank has previously said the proportion of Australians paying their mortgage ahead of schedule was high ahead of other countries, the report found the country is only slightly ahead of European nations.
Fitch said it believes a stagnating housing market and an uncompetitive lending environment are major threats to Australian mortgage repayment rates.
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