As read in the Australian Broker

Australian mortgage arrears have reached their lowest fourth quarter level in more than 10 years, according to the Dinkum Index from Fitch Ratings.

The Dinkum Index tracks the performance of a large number of loans that have been bundled up and sold by lenders to other investors. The index found that the level of 30-day plus arrears overall was merely 0.95% in the quarter to December 2015, the lowest fourth quarter level in 11 years.

The report stated that, “The level of arrears in the fourth quarter of 2015 reflected strong house price growth, low unemployment, low standard variable rates and low inflation.”

Arrears were down by 0.2% compared to the same period in 2014, while the actual loss rate on loans is just 0.02%, put down to rising property prices in major cities allowing lenders to recoup the value of their loans in the event of the borrower defaulting.

Fitch’s report added that APRA’s 2015 move to tighten lending by banks and other financial institutions was one factor in the low mortgage arrears, and suggests loan losses will remain low in the immediate future.

“The introduction of measures, such as interest-rate floors, means borrowers should have more buffers to withstand increases in interest rates and unemployment, and a slowdown in the housing market,” said the report.

John can be contacted on 0749722081 or 0410433919. or email him at jwhitten@ihl.net.au or net www.ihl.net.au. John Whitten is a credit representative (CRN 399796) of BLASSA Pty Ltd (Australian Credit Licence No 391237).