Loan arrears fall

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Arrears of 30-days or more on loans linked to mortgage-backed securities in New Zealand fell in November 2006 to their lowest level in more than two years, according to analysis by the Standard & Poor’s rating service.

Friday, February 2nd 2007, 5:45AM

by Maria Scott

The improvement came at a time of higher financing costs for many homeowners after a period of rising interest rates. The statistics provide support for anecdotal information from some lenders indicating that borrowers have been coping well with higher mortgage costs.

Arrears on loans underlying prime residential mortgage-backed securities (RMBS) fell to 2.19% in November, as measured by the New Zealand Prime Standard & Poor's Mortgage Performance Index (SPIN).

Standard & Poor's surveillance analyst Sarah Raisbeck says this is the lowest level since September 2005 when 2.17% was recorded.

Arrears levels on both prime low documentation (LoDoc) loans and prime full documentation (Full Doc) loans fell, in line with the overall movement. LoDocs fell to 3.69% and Full Docs to 1.81%.

"The level of arrears on residential mortgage loans underlying New Zealand subprime RMBS also fell over November, decreasing to 12.79% in November 2006 from 13.43% in October 2006," Raisbeck said. "Given the small number of loans underlying the sub asset class, the month-to-month figures can be quite volatile."

Residential mortgage loans funded through RMBS now represented more than $1.4 billion.

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