Australian Home Loan Arrears Fall to Lowest Since December 2010

Australian home loan payments more than 90 days late fell to the lowest level since December 2010 in the fourth quarter of 2012 as lower interest rates reduced the debt burden on borrowers, Fitch Ratings said.

The overdue payments on home loans underlying Australian residential mortgage-backed securities fell to 0.55 percent in the three months to December, compared with 0.63 percent in the prior quarter, according to the London-based ratings firm’s Australian residential mortgage performance index.

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 coasts were 6.45 percent as of March 31, the lowest level since November 2009.

“The low level of unemployment, continued strong economy and RBA cuts in the Australian benchmark cash rate during 2012 will provide a stable macro-economic environment over the next 12 months,” Fitch said in an e-mailed report. “Low interest rates and over 20 years of economic growth have resulted in a rise in real estate values and a significant build-up in household debt.”

Payments between 30 and 59 days late climbed to 0.69 percent from 0.49 percent in the third quarter, partially due to a slight increase in living costs, Fitch said.

Fitch expects the RBA cash rate to be at 2.75 percent by the end of this year, it said. The company tracks delinquencies of mortgages underlying prime and so-called low-doc Australian residential mortgage-backed securities.

Australia will stop buying residential mortgage bonds as the cost of issuing the securities has recovered since the credit freeze in 2008, Treasurer Wayne Swan said in a speech today at the Bloomberg Australia Economic Summit in Sydney.

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