REPEAT: RBA Avg Mortgage Rate Up Only +10bps Since Last Yr

Repeats Story Initially Transmitted at 23:35 GMT Aug 13/19:35 EST Aug 13

By Sophia Rodrigues

     SYDNEY (MNI) - Despite a noticeable increase in variable interest rates for

investor loans and interest-only loans over recent months, the average interest

rate paid on all outstanding loans has increased by only about 10 basis points

since late last year, Reserve Bank of Australia Assistant Governor Christopher

Kent said Monday.

     Kent made the comments in a speech at a Moody's Analytics Forum here where

he spoke about the insights the RBA has gathered from data on asset-backed

securities that it uses as eligible collateral in domestic market operations.

The vast bulk of the assets underlying these securities are residential

mortgages, with other assets, such as commercial property mortgages and car

loans, constituting only about 2% of the pools.

     Kent noted that banks have responded to the regulatory actions by

Australian Prudential Regulation Authority (APRA) and the Australian Securities

and Investments Commission (ASIC) by increasing interest rates on investor and

interest-only mortgages. But interest rates on principal-and-interest loans to

owner-occupiers are little changed and remain at very low levels. 

     "Pulling this all together, the average interest rate paid on all

outstanding loans has increased since late last year, but only by about 10 basis

points," he said.

     Another observation made by RBA is that despite many borrowers on

interest-only loan building up sizeable buffers in their offset mortgage

balances, their current loan-to-valuation ratios are larger than in the case of

principal-and-interest loans. 

     Kent said that non-performing housing loans have increased a little over

recent years but at around 0.75% as a share of all housing loans, they remain

low and below the levels reached following the global financial crisis.

     But a drill-down into the data reveals that while the arrears rates "have

increased slightly over recent years, they have increased more noticeably in

regions exposed to the downturn in commodity prices and mining investment," Kent

said.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com