...Ideal Environment for Borrowers: The low level of mortgage arrears reflect the current environment of low interest rates, booming house prices and stable unemployment. The rising cost of living, if it outpaces income growth, may also present a bigger threat to mortgage performance than at present. Lower Bound Constrains Arrears: The 30+ days delinquencies rate has stayed relatively stable since 4Q13 despite declining interest rates, rising house prices and stable unemployment; 30+ arrears dropped 5bp qoq to 1.12% in 2Q15. Fitch Ratings believes there is little capacity for further improvement. Modest CPI Increase: Current CPI rose only a 1.5% yoy in June 2015. But expenses are expected to have a crucial role in borrowers' serviceability. As wages growth remains low, increased cost of living without commensurate growth in wages could pressure serviceability metrics. House-Price Gains Limit Losses: The annualised loss rate continued to improve marginally yoy, as the house-price gain of 9.8%...
