RMBS Performance Watch: Australia - Market Overview - As of Dec. 31, 2020 - S&P Global
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RMBS Performance Watch: Australia - Market Overview As of Dec. 31, 2020
Australian Macroeconomic Environment Vaccination rollouts boost recovery momentum
S&P Global Ratings Economic Outlook: Australia
2021f 2022f Outlook Effect on credit quality
Real GDP 4.0 3.2 Recovery momentum continues, with Improving. Economic growth is
forecast (% year GDP growth forecast to reach 4.0% in recovering as businesses reopen. This
over year) 2021. will help ease the transition of
stimulus measures and mortgage-
relief periods.
Unemployment 6.5 6.0 Job growth recovery continues apace Negative but improving.
rate (year with the reopening of the economy. We Unemployment rate is declining as
average; %) do not expect a return to pre-COVID- jobs growth continues. Leisure, travel
19 unemployment levels until 2023. and hospitality sectors continue to be
impacted by border closures.
CPI (%) 1.4 1.6 Wage growth remains well below long- Negative. Weak wage growth is likely
term averages. Spare capacity in the to persist for some time. This will be
labor market will keep wage growth offset by historically low interest
subdued for some time. rates.
Policy rate, end 0.10 0.10 The Reserve Bank of Australia has Positive. Policy rate cuts tend to be
of year (%) said it will not increase the cash rate effective in Australia because they
until unemployment improves. feed through to mortgages, which are
mostly variable rate.
f--Forecast. CPI--Consumer price index. Source: S&P Global Ratings.
3
Mobility Mostly Back To Pre-Pandemic Levels
Driving Mobility Pre- And Post-Pandemic
Sydney driving Melbourne driving Brisbane driving
160
140 Pre-COVID
120
100
80
60
40
20
Post-COVID
0
Source: Apple Mobility Data.
4
Unemployment Rate Is Improving But There Is Still
Ground To Recover
Nationwide Unemployment Rates
Jan. 2021 Jan. 2020
NT
TAS
SA
WA
Qld
VIC
NSW
Australia
0% 1% 2% 3% 4% 5% 6% 7% 8%
Source: Australian Bureau of Statistics.
5
Leverage Builds As More First-Home Owners
Enter The Market
Uptick In First-Home Owner (FHO) Lending Is Increasing The Share Of High LTV Lending
Lending > 80% LTV as a % of new lending Housing finance commitments first home owner (right scale)
41% $6,000
Growth in FHO Lending is increasing. FHOs
often have smaller deposits, translating to
40%
higher LTV loans. $5,000
39%
$4,000
38%
Mil.
$3,000
37%
High LTV lending dropped off after the
onset of COVID-19 when uncertainty was $2,000
high but has increased since mid-2020.
36%
$1,000
35%
34% $-
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020
LTV—Loan-to-value(ratio). Mil.--Million. Source: Australian Bureau of Statistics, Australian Prudential Regulation Authority
6
Australian RMBS Outlook
– Economic momentum continues as vaccinations commence and local economies mostly reopen.
– Short, sharp lockdowns continue to affect the tourism and travel sectors but do not appear to be
having a material effect on debt serviceability. This reflects the higher exposure to PAYG full-time,
salaried employees across most RMBS transactions.
– Mortgage-deferral levels continue to fall but are likely to plateau in the coming months as the
remaining borrowers under mortgage-deferral arrangements are more likely to be directly affected
by COVID-19 and facing longer term debt-serviceability pressures.
– Arrears are starting to rise as fiscal stimulus measures taper and some borrowers transition from
COVID-19 mortgage-deferral arrangements to formal arrears hardship programs.
– Arrears are likely to surface more meaningfully after mortgage-deferral periods formally expire in
March 2021.
– Improving property prices will help to contain any losses in the event of borrower default as
borrowers’ equity positions in their mortgages are enhanced by rising property values.
7
COVID-19 Update
Mortgage Deferrals Plateau
As Most Borrowers Exit Arrangements
Prime RMBS Average level of COVID-19 arrangements (%) – Mortgage-deferral levels continue to decline
as the economy reopens.
Oct. 2020 Nov. 2020 Dec. 2020 – Mortgage-deferral levels will plateau as
most borrowers who could resume their
repayments have already exited such
Major banks 3.18 2.10 1.96 arrangements.
– Borrowers who are still under mortgage-
Nonbank originators 4.13 3.85 3.82 deferral arrangements are likely to be facing
longer term more permanent debt-
serviceability pressures.
Regional banks 4.05 2.89 3.17
– Lenders will adopt different approaches to
transitioning loans off mortgage-deferral
Other banks 3.73 2.82 1.55 arrangements.
– We expect around 10%-15% of mortgage
Nonbank financial institutions 3.12 2.78 2.73 deferrals (based on May-June peaks) to
transition to formal hardship arrangements,
based on feedback from lenders.
– Borrowers who have already exited
mortgage-deferral arrangements have
Nonconforming RMBS generally resumed repaying their mortgages.
Nonbank originators 4.95 5.00 3.83
Data are as of Dec. 31, 2020. % refers to average % at a trust level. RMBS--Residential mortgage-backed securities. Source: S&P Global Ratings.
9
Borrowers Still Under Deferral Arrangements Have
Higher LTV Ratios
Prime LTV Distribution
Prime total RMBS Prime COVID hardship
– Loans under mortgage-deferral
50% arrangements are skewed toward more
40% highly leveraged borrowers than the broader
RMBS universe.
30%
20% – More highly leveraged borrowers whose
income has been affected by COVID-19 are
10% likely to be under greater debt-serviceability
0% pressure.
and 70%> and 80%> and 90%> and >100%
100%Victoria Has The Highest Level Of Mortgage-
Deferral Arrangements
COVID-19 hardship
COVID-19 Exposure By State Total RMBS sector
1% 1%
Northern
Territory 20% 23%
Queensland
Western
8% 10% Australia
South
4% 6% Australia
32% 32%
1% 2%
New South
Wales Australian
Capital
Territory
33% 25% Victoria
Data as of Dec. 31, 2020. RMBS--Residential mortgage-backed securities.
Source: S&P Global Ratings.
1% 2% Tasmania
11Investor Arrears Are Rising Faster In Inner City
Areas
Largest Rises In Investor Arrears Were In Areas Close To CBDs
– Debt-serviceability pressures were more
30+ days arrears 30+ days arrears acute for investors with properties in inner-
Region State Dec. 2020 Dec. 2019 city areas.
– Since the pandemic, inner-city areas have
Sydney - Eastern Suburbs NSW 2.34% 0.48% experienced some of the greatest increases
in arrears, albeit off low levels.
Brisbane Inner City QLD 2.22% 0.59% – Inner-city locations in Melbourne and
Sydney have suffered some of the greatest
declines in rental income in the past 12
Sydney - Parramatta NSW 2.15% 0.80% months as renters moved out of the city and
international borders closed.
Melbourne - Inner VIC 1.87% 0.73% – Inner-city areas in Melbourne and Sydney
formerly had some of the lowest arrears in
the RMBS sector.
Sydney - Ryde NSW 1.34% 0.21%
– Refinancing conditions are likely to be more
difficult for investors with properties in
Sydney - South West NSW 3.17% 2.08% inner-city locations, adding to debt-
serviceability pressures.
Melbourne - Inner South VIC 1.79% 0.71% – Most RMBS transactions are geographically
well diversified so the exposure to these
locations in most transactions is
Sydney - Inner West NSW 1.52% 0.50%
insignificant.
Data as of Dec. 31, 2020. RMBS--Residential mortgage-backed securities. Source: S&P Global Ratings. Data set based on investor loans underlying Australian RMBS
transactions. Geographical areas are based on the ABS SA4 Classification.
12Australian RMBS Performance Arrears set to increase as stimulus measures taper and mortgage deferrals end
Prime Arrears Are Edging Up But Low Interest
Rates Are Helping Most Borrowers
31-60 days 61-90 days 90+ days Standard variable rates (right scale)
1.80% 12%
Earlier arrears categories are sensitive
1.60% to interest-rate movements
10%
1.40%
1.20% 8%
1.00%
6%
0.80%
0.60% 4%
0.40%
2%
30+ days arrears Dec. 2020: 1.37%
0.20%
30+ days arrears Dec. 2019: 1.28%
0.00% 0%
Source: Reserve Bank of Australia. S&P Global Ratings.
14Non-Conforming Arrears Well Below Financial
Crisis Highs
31-60 days 61-90 days 90+ days Total current loan balance (right scale)
20% 16.00
Nonconforming loan balances have
nearly quadrupled in the past five years
Nonconforming arrears 14.00
peaked at 17.09% after
the 2008 financial crisis
15% 12.00
10.00
Bil. A$.
10% 8.00
6.00
5% 4.00
2.00
0% 0.00
Bil.--Billion. Source: S&P Global Ratings.
15Prime Prepayment Rates Are Stabilizing
– Prime prepayment rates dipped in the
Prime prepayment rate (Inc. Non-Capital Market Issuance) December quarter. This is a seasonal trend,
with prepayment rates typically slowing in
Nonconforming prepayment rate
the fourth quarter as borrowers increase
10-year long-term average prime prepayment rate consumer spending in the lead up to
Prime prepayment rate (Exc. Non-Capital Market Issuance) Christmas.
40% – We expect prime prepayment rates to
stabilize around long-term averages in 2021
35% because borrowers who were looking to
refinance have probably already done so.
30% – Nonconforming prepayment rates increased
to 24.37% in December from 21.89% in
25%
September.
20% – This could reflect the increasing competition
in the nonconforming sector, driving record
15% new issuance volumes and bolstering
refinance activity.
10%
– A resurgence in property prices could further
5% boost refinance activity, increasing
prepayment rates. Rising arrears will offset
0% this to some degree.
– Borrowers who might be under financial
pressure post-COVID-19 might capitalize on
increasing property prices by selling their
Data as of Dec. 31, 2020. Source: S&P Global Ratings. homes and monetizing their equity build up.
16Offshore Observations: International Arrears
International Comparisons – 30+ Day Mortgage Arrears
30+ Day mortgage arrears - Prime RMBS
UK Italy Spain Netherlands Australia
7%
6%
5%
4%
3%
2%
1%
0%
RMBS--Residential mortgage-backed securities. Data as of Dec 31, 2020. Source: S&P Global Ratings.
17Offshore Observations: International Prepayment
Rates
International Comparisons – Prime Prepayment Rates
Prime RMBS prepayment rates
U.K Spain Italy Netherlands Australia
30%
25%
20%
15%
10%
5%
0%
RMBS--Residential mortgage-backed securities. Data as of Dec 31, 2020. Source: S&P Global Ratings.
18COVID-19’s Effect On Losses Will Be Tempered By
Rising Property Prices
Property prices are rebounding. Increasing property prices will temper losses in the event of borrower
default. The lower loss profile of recent vintages reflects the modest LTV ratio profile of most RMBS
transactions and strong equity buildup in many loans.
Cumulative Gross Loss By Vintage Of Cumulative Gross Loss By Vintage Of
Origination - Prime RMBS Origination - Nonconforming RMBS
0.07% 0.90%
0.80%
0.06%
0.70%
0.05%
0.60%
0.04% 0.50%
0.03% 0.40%
0.30%
0.02%
0.20%
0.01%
0.10%
0.00% 0.00%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
RMBS--Residential mortgage-backed securities. Source: S&P Global Ratings. RMBS--Residential mortgage-backed securities. Source: S&P Global Ratings.
19Arrears Performance Nationwide COVID-19’s effect on debt serviceability is starting to emerge
Debt-Serviceability Pressures
Are Emerging At The Margins
Australia The tapering of fiscal stimulus measures
and expiration of mortgage-deferral
periods for many borrowers will lead to an
increase in arrears, but at the margin.
Low interest rates, increasing property
prices, and strong refinancing conditions
for borrowers of a good credit quality bode
well for the continued strong performance
of the Australian RMBS sector.
We expect debt-serviceability pressures
to meaningfully surface after March 2021,
when mortgage-deferral periods formally
expire.
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
Map boundaries are based on the ABS SA4 geographical classifications. Some areas on the map have been merged graphically. Source: S&P Global Ratings.
21Pre- And Post-Pandemic Population Shifts
And Their Effect On Debt Serviceability
Annual Migration Trends: June 2019 – June 2020
– Prepandemic population shifts, including
Net interstate migration Net overseas migration greater interstate migration to Queensland,
increased after the pandemic.
70,000
– Housing affordability traditionally has been a
60,000 key driver of net interstate migration into
states like Queensland from New South
50,000
Wales and Victoria.
– A shift to more remote working and a desire
40,000 for more floor space to accommodate this
will strengthen net interstate migration to
30,000 areas with more affordable housing.
– Increased population inflows will translate to
20,000
increased demand for property.
10,000 – This will influence property prices and have
positive flow-on effects on debt
0 serviceability as increasing property values
improve refinancing prospects.
(10,000) – Property price growth will differ for states
due to variations in population dynamics.
(20,000)
(30,000)
NSW Vic. Qld SA WA Tas. NT ACT
Source: Australian Bureau of Statistics.
22Mortgage Belt And Inner-City Areas
Home To Largest Increases In Arrears
Highest year-on-year increases in arrears across the Australian
RMBS sector.
– The largest year-on-year increases in arrears
30+ Arrears 30+ Arrears were in some inner-city and mortgage belt
Regional name State Dec. 2020 Dec. 2019 areas.
– Inner-city areas in Melbourne and Sydney
Sydney - South West NSW 3.40% 2.08% traditionally have had some of the lowest
arrear across the Australian RMBS sector.
Sydney - Parramatta NSW 1.99% 0.80%
– Greater arrears increases in these areas,
albeit off low levels, partly reflects
Sydney - Eastern Suburbs NSW 1.50% 0.48%
borrowers’ greater debt-to-income levels,
particularly in Sydney, where property prices
Brisbane Inner City QLD 1.55% 0.59%
are expensive.
Sydney - Inner West NSW 1.33% 0.50% – Higher debt-to-income ratios increase
borrowers’ sensitivity to decreased incomes.
Sydney - Ryde NSW 0.97% 0.21%
– Rental income in inner-city areas in Sydney
and Melbourne has been hurt by COVID-19,
Melbourne - Inner South VIC 1.45% 0.71%
affecting investor income. This has also
contributed to higher arrears in these areas.
Melbourne - Inner VIC 1.45% 0.73%
– This could change as housing affordability
Sydney - Northern Beaches NSW 1.15% 0.49% pressures rise, workers return to the office,
and international migration resumes.
Sydney - Inner South West NSW 2.26% 1.61%
Sydney - City and Inner South NSW 1.21% 0.58%
Data as of Dec. 31, 2020. RMBS--Residential mortgage-backed securities. Source: S&P Global Ratings. Data set based on all loans underlying Australian RMBS
transactions. Geographical areas are based on the ABS SA4 Classification.
23New South Wales: Unemployment Remains Higher
Than Pre-Pandemic Low
111
212
110 104 102
115
105
116 121
108 122
106 125
127
124 119
103 128
123
109
107
113
101 114
NSW’s service-oriented economy has been hit harder by
international border closures than other states.
This has contributed to a larger rise in unemployment pre- and
post-pandemic. Debt-serviceability pressures are typically
higher for Sydney borrowers, particularly in mortgage belt areas,
given Sydney’s expensive property prices relative to average
household income. This increases households’ sensitivity to Current 30+ Peak 30+ Unemployment Exposure
pressure on household income. Days Arrears Days Arrears Rate Across RMBS
1.49% 2.69% 6.00% 32%
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
Source: Australian Bureau of Statistics. S&P Global Ratings. Note: Numbers on the chart are the geographic SA4 area codes as defined by the Australian Bureau of
Statistics. The full list of SA4 areas can be found on slides 31-32.
24Victoria: Lockdown Hangover
Reflected In Higher Mortgage-Deferral Levels
Victoria’s longer lockdown led to a higher
proportion of borrowers still under mortgage-
deferral arrangements and this is likely to
translate to higher arrears in the months
ahead. Refinancing prospects might also be
more difficult for some borrowers in Victoria. 215
More exposed borrowers include investors
with properties in inner-city areas, where 216
202
rental income has fallen, and self-employed
204
borrowers, who are more highly represented in
nonconforming transactions. Improving house 201
prices, low interest rates, and the continued
reopening of the economy should help to keep 205
214
arrears low for most borrowers.
203
Current 30+ Peak 30+ Unemployment Exposure
Days Arrears Days Arrears Rate Across RMBS
1.50% 1.86% 6.3% 25%
210
209
211
213
212
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
214
Source: Australian Bureau of Statistics. S&P Global Ratings. Note: Numbers on the chart are the geographic SA4 area codes as defined by the Australian Bureau of
Statistics. The full list of SA4 areas can be found on slides 31-32 25Queensland: Property Price Growth Heats Up,
Improving Debt Serviceability
Queensland has become the
316 nation's most desirable location
since the pandemic. This is
313 reflected in its stronger property
price growth and higher net
interstate migration.
Improving property prices help build
borrowers’ equity in their home
317 310 loans. This helps with refinancing
306
prospects, a common way to self-
manage out of arrears.
318 309
311 While areas more dependent on
tourism will continue to face higher
312 unemployment while borders
315 remain closed and uncertainty over
future closures remain, the flow-on
308 effect on arrears will be tempered
by the nature of job losses. Tourism
319 sector employees are more likely to
be renters.
307
Current 30+ Peak 30+ Unemployment Exposure
Days Arrears Days Arrears Rate Across RMBS
1.43% 2.17% 7.0% 23%
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
Source: Australian Bureau of Statistics. S&P Global Ratings. Numbers on the chart are the geographic SA4 area codes as defined by the Australian Bureau of Statistics.
The full list of SA4 areas can be found on slides 31-32
26Western Australia: Arrears And Property Prices
Are Turning A Corner
Strong demand for iron ore is
underpinning Western Australia’s post-
pandemic recovery. This is helping property
prices, which is good for arrears because it
505 improves borrowers’ refinancing prospects.
Arrears remain higher in WA overall due to
the presence of legacy loans from the
504
508 mining boom era, many of which are in
advanced stages of arrears. These loans
typically have high LTV ratios, reflecting the
503 significant market value declines in many
parts of Western Australia since the mining
506 boom.
507
509
502
501
Current Peak 30+ Peak 30+ Unemployment Exposure
Days Arrears Days Arrears Rate Across RMBS
2.46% 3.10% 6.20% 10%
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
Source: Australian Bureau of Statistics. S&P Global Ratings. Numbers on the chart are the geographic SA4 area codes as defined by the Australian Bureau of Statistics.
The full list of SA4 areas can be found on slides 31-32
27South Australia: Arrears Less Affected
By COVID-19
South Australia’s success in containing the virus enabled
its economy to remain open. This is likely to lead to lower
increases in arrears flowing from COVID-19. On average,
arrears are typically higher in South Australia. This
reflects its traditionally higher unemployment rate
compared with more populous states with greater
406 employment diversity.
Current 30+ Peak 30+ Unemployment Exposure
Days Arrears Days Arrears Rate Across RMBS
1.31% 1.81% 7.10% 6%
405
407
402
404
401
403
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
Source: Australian Bureau of Statistics. S&P Global Ratings. Numbers on the chart are the geographic SA4 area codes as defined by the Australian Bureau of Statistics.
The full list of SA4 areas can be found on slides 31-32
28Tasmania: Arrears Are Falling
Tasmania’s unemployment rate was below several of its
state counterparts in January 2021. Together with
property price growth, this has helped to stabilize
604 602 arrears as mortgage-deferral periods expire. Exposure
to Tasmania in most RMBS transactions is
insignificant, at less than 2%.
603
601
Current 30+ Peak 30+ Unemployment Exposure
Days Arrears Days Arrears Rate Across RMBS
0.81% 2.02% 5.90% 2.0%
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
Source: Australian Bureau of Statistics. S&P Global Ratings. Numbers on the chart are the geographic SA4 area codes as defined by the Australian Bureau of Statistics.
The full list of SA4 areas can be found on slides 31-32
29The Territories: The Best And Worst
Of Arrears Performance
701
Northern Territory has the most volatile arrears
performance due to small exposures in portfolios. Darwin
still has a disproportionate share of COVID-19 hardship
arrangements, reflecting the border closure’s effect on
the tourism sector.
702
Current 30+ Peak 30+ Unemployment Exposure
Days Arrears Days Arrears Rate Across RMBS
2.90% 3.50% 6.2% 1.0%
Australian Capital Territory has the nation’s lowest
arrears, at 0.93%, as of Dec. 31, 2020. This reflects its
stronger employment profile and lower unemployment.
0%-0.74% 0.75%-1.24% 1.25%-1.74% 1.75%-2.24% +2.25%
Source: Australian Bureau of Statistics. S&P Global Ratings. Numbers on the chart are the geographic SA4 area codes as defined by the Australian Bureau of Statistics.
The full list of SA4 areas can be found on slides 31-32
30SA4 Listing Arrears And Exposure
30+ days 30+ days 30+ days 30+ days
Geographic arrears arrears Exposure Geographic arrears arrears Exposure
area map level level across area map level level across
code Regional name State Dec. 2020 Dec. 2019 RMBS code Regional name State Dec. 2020 Dec. 2019 RMBS
101 Capital Region NSW 1.07% 1.40% 1.20% 124 Sydney - Outer West and Blue Mountains NSW 1.53% 1.15% 0.94%
102 Central Coast NSW 1.25% 1.45% 1.54% 125 Sydney - Parramatta NSW 1.99% 0.80% 2.17%
103 Central West NSW 1.33% 1.89% 0.48% 126 Sydney - Ryde NSW 0.97% 0.21% 0.54%
104 Coffs Harbour - Grafton NSW 0.86% 1.05% 0.36% 127 Sydney - South West NSW 3.40% 2.08% 0.90%
105 Far West and Orana NSW 1.68% 2.81% 0.18% 128 Sydney - Sutherland NSW 1.36% 1.13% 0.82%
106 Hunter Valley exc Newcastle NSW 0.80% 1.34% 1.43% 201 Ballarat VIC 1.25% 1.26% 0.66%
107 Illawarra NSW 1.11% 1.29% 1.75% 202 Bendigo VIC 1.44% 1.57% 0.33%
108 Mid North Coast NSW 1.31% 1.49% 0.45% 203 Geelong VIC 0.81% 1.14% 1.14%
109 Murray NSW 0.98% 1.25% 0.68% 204 Hume VIC 1.62% 2.79% 0.30%
110 New England and North West NSW 1.07% 2.21% 0.24% 205 Latrobe - Gippsland VIC 1.65% 1.86% 0.58%
111 Newcastle and Lake Macquarie NSW 0.96% 0.98% 1.64% 206 Melbourne - Inner VIC 1.45% 0.73% 4.40%
112 Richmond - Tweed NSW 1.65% 1.66% 1.05% 207 Melbourne - Inner East VIC 1.19% 0.92% 1.80%
113 Riverina NSW 1.11% 2.61% 0.11% 208 Melbourne - Inner South VIC 1.45% 0.71% 2.26%
114 Southern Highlands and Shoalhaven NSW 1.76% 1.25% 0.27% 209 Melbourne - North East VIC 1.59% 1.30% 2.60%
115 Sydney - Baulkham Hills and Hawkesbury NSW 1.63% 1.11% 1.93% 210 Melbourne - North West VIC 1.96% 1.38% 1.34%
116 Sydney - Blacktown NSW 1.68% 1.43% 2.43% 211 Melbourne - Outer East VIC 1.18% 1.10% 2.48%
117 Sydney - City and Inner South NSW 1.21% 0.58% 3.00% 212 Melbourne - South East VIC 1.61% 1.64% 2.58%
118 Sydney - Eastern Suburbs NSW 1.50% 0.48% 0.85% 213 Melbourne - West VIC 2.01% 1.62% 2.72%
119 Sydney - Inner South West NSW 2.26% 1.61% 3.32% 214 Mornington Peninsula VIC 1.67% 1.70% 1.32%
120 Sydney - Inner West NSW 1.33% 0.50% 1.27% 215 North West VIC 1.24% 1.18% 0.12%
121 Sydney - North Sydney and Hornsby NSW 1.12% 0.65% 2.24% 216 Shepparton VIC 1.20% 1.91% 0.12%
122 Sydney - Northern Beaches NSW 1.15% 0.49% 1.48% 217 Warrnambool and South West VIC 0.93% 1.33% 0.21%
123 Sydney - Outer South West NSW 1.85% 1.83% 1.05% 301 Brisbane - East QLD 1.18% 1.60% 1.48%
31SA4 Listing Arrears And Exposure
30+ days 30+ days 30+ days 30+ days
Geographic arrears arrears Exposure Geographic arrears arrears Exposure
area map level level across area map level level across
code Regional name State Dec. 2020 Dec. 2019 RMBS code Regional name State Dec. 2020 Dec. 2019 RMBS
302 Brisbane - North QLD 0.96% 0.81% 2.05% 404 Adelaide - West SA 1.30% 1.22% 0.78%
303 Brisbane - South QLD 1.12% 1.19% 2.82% 405 Barossa - Yorke - Mid North SA 2.22% 3.56% 0.15%
304 Brisbane - West QLD 0.80% 0.76% 1.28% 406 South Australia - Outback SA 2.26% 1.93% 0.13%
305 Brisbane Inner City QLD 1.55% 0.59% 0.96% 407 South Australia - South East SA 1.57% 2.49% 0.30%
306 Cairns QLD 1.94% 1.99% 0.85% 501 Bunbury WA 2.06% 2.60% 0.43%
307 Darling Downs - Maranoa QLD 1.34% 2.05% 0.96% 502 Mandurah WA 2.82% 3.56% 0.30%
308 Fitzroy QLD 2.70% 3.42% 0.92% 503 Perth - Inner WA 1.41% 1.16% 1.03%
309 Gold Coast QLD 1.38% 1.37% 3.23% 504 Perth - North East WA 2.65% 2.91% 1.31%
310 Ipswich QLD 1.63% 2.24% 1.21% 505 Perth - North West WA 2.17% 3.03% 2.01%
311 Logan - Beaudesert QLD 1.59% 2.72% 0.56% 506 Perth - South East WA 2.96% 2.53% 2.06%
312 Mackay QLD 2.43% 3.33% 0.75% 507 Perth - South West WA 2.33% 2.76% 1.51%
313 Moreton Bay - North QLD 1.47% 2.00% 1.27% 508 Western Australia - Outback WA 3.52% 4.31% 0.39%
314 Moreton Bay - South QLD 0.96% 1.00% 0.65% 509 Western Australia - Wheat Belt WA 3.65% 3.66% 0.17%
315 Queensland - Outback QLD 2.30% 4.99% 0.15% 601 Hobart TAS 0.64% 1.05% 0.81%
316 Sunshine Coast QLD 1.33% 1.55% 1.59% 602 Launceston and North East TAS 1.25% 1.12% 0.34%
317 Toowoomba QLD 0.00% 3.39% 0.01% 603 South East TAS 1.83% 1.04% 0.03%
318 Townsville QLD 1.82% 2.62% 1.03% 604 West and North West TAS 0.62% 1.43% 0.22%
319 Wide Bay QLD 1.87% 2.38% 0.58% 701 Darwin NT 3.08% 2.98% 0.64%
401 Adelaide - Central and Hills SA 1.02% 1.13% 1.44% 702 Northern Territory - Outback NT 1.85% 0.98% 0.08%
402 Adelaide - North SA 1.53% 1.67% 1.22% 801 Australian Capital Territory ACT 0.93% 0.88% 1.73%
403 Adelaide - South SA 1.16% 1.28% 1.32% 901 Other Territories WA 0.00% 0.00% 0.00%
32The 10 Worst-Performing Postcodes
State Suburb Postcode Loans in arrears
VIC Altona east 3025 6.14%
WA Forrestfield 6058 5.58%
WA Byford 6122 4.90%
NSW Catherine Field 2557 4.79%
WA Binduli 6430 4.70%
NT Darwin 800 4.67%
NSW Guildford 2161 4.55%
WA Cloverdale 6105 4.49%
NSW Bankstown 2200 4.46%
WA Maddington 6109 4.46%
Source: S&P Global Ratings. Data as of Dec. 31, 2020. For a full list of suburbs/localities attached to these postcodes, please refer to the Australia Post website.
33New Zealand
S&P Global Ratings Economic Outlook
2021f 2022f Outlook Effect on credit quality
Real GDP 4.3 2.9 The country has outperformed nearly Improving. New Zealand’s good
growth (% year all others in containing COVID-19. progress on the health front has laid
over year) the groundwork for a solid economic
recovery.
Unemployment 5.8 5.5 A wage-subsidy scheme has run its Improving. A recovery in economic
rate (year course but there is not much evidence activity has been reflected in stronger
average; %) to date of labor market scarring, with than expected labor market recovery.
unemployment falling to less than 5%
as of the end of 2020, against
expectations of a further increase.
CPI (%) 1.5 1.5 Wage growth is likely to remain Negative but improving. Although
subdued in the wake of COVID-19 but wage growth has remained subdued, it
labor shortages in some sectors could could rise, given increased demand
shift this. for labor, particularly in the retail and
construction sectors.
Policy rates, end 0.00 0.50 The official cash rate is set to remain Positive. Lower rates will support debt
of year (%) low for 2021 but is forecast to serviceability for borrowers with
increase from 2022. variable-rate mortgages.
f--Forecast. CPI--Consumer price index. Source: S&P Global Ratings.
35House Prices Surge
– New Zealand’s early success in containing the spread of COVID-19 has enabled its
economy to remain largely open, despite, international border closures. This has laid the
framework for a solid economic recovery.
– Wage subsidy schemes have expired, but unemployment is back to pre-COVID-19 level as
labor demand has rebounded, particularly in sectors with labor shortages, such as
construction.
– Housing prices have surged, with property price growth close to 20% in 2020. Growth has
been underpinned by low interest rates, returning expatriates, supply shortages, and a
winding back of LTV ratio restrictions.
– This increases the risk of a property price correction, particularly given the high levels of
household debt in New Zealand. To address these risks, the Reserve Bank of New
Zealand is reinstating LTV ratio lending limits in March 2021.
– S&P Global Ratings raised its foreign-currency sovereign ratings to 'AA+/A-1+' from
'AA/A-1+' and its local currency sovereign ratings to 'AAA/A-1+' from 'AA+/A-1+’ on New
Zealand in February 2021. The outlook is stable (see “New Zealand Ratings Raised To
'AA+' FC And 'AAA' LC As Pandemic Risks Moderate; Outlook Stable,” Feb. 2021).
36RMBS Sector Performance Remains Stable
– The credit quality of the New Zealand RMBS sector is strong, as evidenced by:
– Weighted-average LTV ratio of 62%.
– Average loan size of NZ$209,626.
– Weighted-average seasoning of 43 months.
– Low levels of arrears in most portfolios.
– All losses to date have been fully covered by lenders’ mortgage insurance.
– Several pools are now “small pools,” which have greater borrower concentration
risk.
RMBS--Residential mortgage-backed securities. LTV--Loan to value ratio.
37How To Access RMBS Performance Watch
RMBS Performance Watch including arrears, prepayment, and pool statistics data
can be accessed using the link below:
CLICK HERE
Asia-Pacific
Structured Finance
Surveillance
38RMBS Analytical Contacts
Kate Thomson
Analytical Manager | kate.thomson@spglobal.com
Narelle Coneybeare
Sector Lead | narelle.coneybeare@spglobal.com
Erin Kitson
Sector Specialist Research | erin.kitson@spglobal.com
Elizabeth Steenson
Lead Analyst | elizabeth.steenson@spglobal.com
Alisha Treacy
Lead Analyst | alisha.treacy@spglobal.com
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