Low Doc Arrears On The Rise In New Zealand

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By Rudi Filapek-Vandyck

Arrears on low doc loans are on the rise in New Zealand though arrears on prime loans are improving, trade magazine for the banking industry The Sheet reports. The conclusion is based upon a survey by Standard & Poor’s on arrears on loans funded through mortgage-backed securities.

According to the survey, arrears of 30 days or more on low doc loans increased to 6.13% in April 2006, up from 5.66% at March 2006 and compared with 4.0% one year ago.

While arrears on low doc loans seem to be increasing rather rapidly, arrears on full doc loans decreased to 2.55%, down from 2.62% in March, but still up from 1.95% a year ago.

The Sheet adds that the pool of home loans on which S&P’s arrears data is based is only around NZ$1bn, which is a small share of the total Kiwi home loan market. According to the Reserve Bank of New Zealand registered banks in New Zealand held mortgages of around NZ$44bn.

As a result, The Sheet believes, swings in arrears measured by S&P from securitised pools of home loans may be a lot less meaningful in New Zealand compared with equivalent data on Australia, where securitised home loans account for about one quarter of the market.

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