Home Loans underlying Australian prime residential mortgage-backed securities currently in excess of 30 days in arrears increased to 1.81 per cent in March 2011, from 1.44 per cent in December 2010.

According to a report published by Standard & Poor’s Ratings Services, this represents a significant 25 per cent increase in home loan arrears bringing the level closer to the historical high of 1.84 per cent experienced in January 2009.

Subprime RMBS arrears increased by 103 basis points to 11.22 per cent during the same period.

Most years home loan arrears peak early in the year following Christmas spending before easing in March, however current trends suggest that this year arrears continue to increase well int o the middle of the year.

Borrower ability to service home loan debts declined with the extreme flood and cyclone events experienced earlier this year, combined with higher cost of living and mortgage rates, have contributed to elevated arrears in Q1 2011. And with interest rates expected to remain at current levels or higher, there is expectation that home loan arrears could surpass the current peak, until a subsequent boost in economic activity occurs as the repair and replacement of damaged assets gets underway.

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