Moody's: Australian auto ABS performance deteriorated, but RMBS performance improved in August

Moody's Investors Service says the performance of Australian auto ABS transactions deteriorated in August 2015 from July 2015, with delinquencies in excess of 30 days rising to 1.23% from 1.17%. Moreover, the year-on-year performance was worse in August 2015 when compared with the 1.04% seen in August 2014.

As for the month-on-month performance of Australian prime RMBS deals, delinquencies in excess of 30 days fell to 1.14% in August 2015 from 1.25% in July 2015. The year-on-year performance of such deals also improved. Specifically, delinquencies in excess of 30 days fell by 9 basis points in August 2015 from the 1.25% seen in August 2014.

In the 12 months to 30 September 2015, home prices rose in Sydney, Melbourne and Brisbane, declined in Darwin, and remained relatively flat in the rest of the cities. The largest year-over-year increase was in Sydney, at 16.72%. The second-largest increase was in Melbourne, at 14.22%. On a weighted average basis, home prices in the capital cities increased by 11.02%.

Moody's visit with investors in Japan and Hong Kong in October found that a key concern for the Australian market is the escalating housing prices, particularly in Sydney and Melbourne, where housing affordability has deteriorated significantly.

In October 2015, the big four banks raised mortgage interest rates by 15 to 20 basis points despite cash rates remaining unchanged at 2.0%. The increase could further deteriorate housing affordability, especially in Sydney and Melbourne, since the two cities are more sensitive to interest rates movement.

These views are outlined in Moody's recently published sector comment on Australian RMBS and ABS titled "Heard From the Market: Australian Housing Prices a Key Issue". Subscribers can access the report through the link provided at the end of this press release.

As for the Australian economy as a whole, Moody's expects GDP growth of 2% in 2015, after the 2.7% recorded in 2014. The direct and indirect effects of lower growth in China (Aa3 stable) partly account for the below-trend growth in Australia.

Lower commodity prices will contribute to a further decline in mining investments; a major source of growth in prior years. As a result, economic growth in 2015-16 will be mainly driven by consumer spending.

With regard to unemployment, Moody's forecasts a slight increase in Australia's unemployment rate to around 6.5% for 2015 from 6.1% in 2014.