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TEXT-Fitch: Western Australia mortgages recover, Queensland still lags
August 21, 2012 / 2:12 PM / 5 years ago

TEXT-Fitch: Western Australia mortgages recover, Queensland still lags

Aug 21 - Link to Fitch Ratings' Report: Australian Mortgage Delinquency by
Postcode - 31 March 2012Aug 21 - Fitch Ratings has said, in its latest update of Australian mortgage
performance, that Queensland (QLD) is still the worst-performing Australian
state with 30+days arrears rising to 1.86% at end March 2012, from 1.70% six
months earlier. The delinquency rate in QLD is above the average 1.60%
delinquency rate across Australia, up 18bp from 1.42% in September 2011.

The regions located south of Brisbane (Ipswich, Logan and the Gold Coast) are
among the worst-performing regions in Australia; however, delinquency rates in
Brisbane are relatively low and below the national average. While arrears in QLD
have not shown signs of stabilising, Western Australia (WA) continues to show a
more discernible improvement in mortgage performance than the rest of the
country.

"Arrears in WA have improved above average and increased less than other states,
exhibiting an overall positive trend. The improvement was particularly
noteworthy in the 90+ days bucket in regional WA, where the arrears had built up
due to a stagnating housing market, indicating an increasing clearance rate for
secured properties of delinquent loans" says James Zanesi, Director in Fitch's
Structure Finance team. "WA has benefitted from the rebound in the mining
sector, the local economy, and housing market, as well as low unemployment",
added Mr. Zanesi

The delinquency rate in WA worsened only marginally to 1.59% in March 2012, from
1.50% six months before. No region in WA was among the top 10 worst-performing
regions. Delinquencies in South West WA, which was the eighth worst-performing
Australian region in September 2011, dropped 32bp to 1.85% as of March 2012.
Central Metropolitan Perth also experienced a significant improvement in
delinquency levels and it was the fifth best-performing region in Australia as
of March 2012.

Nevertheless, Fitch expects Australian mortgage performance to improve in Q312
following the Reserve Bank of Australia's decision to further reduce the cash
rate by 50bp in May 2012 and 25bp in June 2012. Interest rate movements are
reflected in mortgage performance with a three- to four-month lag. Regions in
which serviceability is key to mortgage performance, such as New South Wales
(NSW), are expected to benefit the most.

As of March 2012, Fairfield-Liverpool (NSW) was still the worst-performing
region in Australia, with 30+ day delinquencies at 2.82%, compared to 2.63% in
September 2011. This region and others in southwest and western Sydney (e.g.
Outer South West Sydney) continued to exhibit higher rates of delinquencies than
the rest of NSW. Above-average delinquency rates in these regions can be
attributed to socio-economic variables which increase sensitivity to interest
rates movements, as well as to changes in the cost of living, or Christmas
spending. This is also reflected at the postcode level, with 11 of the 20
worst-performing postcodes being located in NSW, seven of which are around
Sydney, predominantly in southwest and western Sydney.

Nelson Bay (NSW), which is located in the Hunter region, continued to be the
worst-performing postcode by value of mortgages in arrears, with a 30+ day
delinquency rate of 7.8% as of March 2012. As mentioned in previous reports, the
high level of arrears follows the stagnation in the local housing market, which
leads to an accumulation of arrears in the 90+ day bucket. Budgewoi (NSW), which
is located on the Central Coast, was the worst-performing suburb by number of
mortgages in arrears, with 33 borrowers out of 1,000 in delinquency as of March
2012.

The report, "Australian Mortgage Delinquency by Postcode - 31 March 2012",
analyses the performance of the local residential mortgage market using data
covering around 15% of all mortgages in Australia (over 1 million loans), as of
March 2012, with a total outstanding balance of over AUD182bn.

The report is available on www.fitchratings.com or by clicking on the link
above.

Additional information is available at www.fitchratings.com.

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