Mortgage arrears most severe among non-bank lenders

Patterns of home loan arrears vary markedly within pools of home loans monitored by Standard & Poor's. Loans originated by non-bank entities – such as those funded through Australian Mortgage Securities, Macquarie Securitisation, Rams and First Mac – show arrears that are above average, while arrears for other categories of lenders are below average. The S&P data shows that arrears of 30 days or more on home loans funded by non-banks at March 2006 represent 1.76 per cent of loans funded by these entities. The ratio of home loan arrears for well-seasoned loans sold by major banks into securitisation vehicles was 0.48 per cent at March. One reason for this difference may be that non-bank entities finance almost their entire mortgage book through mortgage-backed trusts monitored by S&P, while banks are much more selective in the loans they tip into securitisation vehicles.