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Loans underlying Australian prime residential mortgage-backed securities rose slightly in October 2011, the latest report by Standard & Poor’s Ratings Services has found.
While the Australian economy has been strong of late, Standard & Poor’s credit analyst Vera Chaplin said the results weren’t surprising and instead conformed with traditional trends.
"Whilst a relatively stable macroeconomic environment continues to underpin the performance of Australian RMBS portfolios, recent interest rate increases by banks and financial institutions and modest weakening in labour market fundamentals may impact arrears performance at the margin in coming months, as some borrowers face difficulties with increasing loan repayments," Ms Chaplin said.
"The seasonal impact of the Christmas and holiday period is also likely to see some upward trends in arrears in coming months."
According to the report, arrears on prime RMBS rose four basis points to 1.56 per cent.
In addition, subprime RMBS arrears rose by 36 basis points to 10.74 per cent in October.
Specifically, new subprime arrears rose by 78 basis points and severe arrears fell by 41 basis points.
An arrear is a financial and leger term used to describe an overdue payment.
Mortgages are loans that are used to buy homes and other real estate where the property itself serves as collateral for the loan.