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Australian Home Loan Arrears Fall to 1.36% in 3rd Quarter

The share of Australian home owners missing payments on their mortgages dropped “significantly” in the third quarter as borrowers benefited from interest-rate cuts and unemployment remained low, Fitch Ratings said.

The proportion of home loan payments more than 30 days late fell to 1.36 percent in the three months ended Sept. 30, from 1.54 in the previous quarter, the ratings company said in a statement today.

The Reserve Bank of Australia has cut its benchmark interest rate by 1.75 percentage points since Nov. 1, 2011, to 3 percent, matching a half-century low. Standard variable home loan costs were 6.65 percent as of Nov. 30, the least since February 2010, central bank data show. The nation’s unemployment rate unexpectedly dropped to 5.2 percent in November, from 5.4 percent the month prior, as a labor market driven by mining-industry hiring weathers a weaker global economy.

“The two interest rate cuts in the second quarter have given borrowers additional relief,” Hai Duong Le, a Sydney-based analyst in Fitch’s structured finance team, said in the statement. “This is despite the fact that Australian lenders have not passed on the full benefit of recent rate cuts.”

Home prices in Australia’s eight state and territory capitals fell 0.1 percent in November from a year earlier, according to researcher RP Data. Houses in Perth and Darwin will lead a price recovery in 2013 with gains of as much as 7 percent, according to a Australian Property Monitors report this month.

The share of low-documentation loans that were more than 30 days late fell to 6.98 percent from 7.19 percent in the second quarter, Fitch said. While self-employed borrowers typically take longer to catch up on payments and cure their delinquency status given the nature of cash flow in the sector, low interest rates will bring relief, it said.

Fitch tracks delinquencies of mortgages underlying prime and so-called low-doc Australian residential mortgage-backed securities.

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