OREANDA-NEWS. Structured finance (SF) transactions in Australia and New Zealand remained stable in 1Q16, with 184 tranches from 77 transactions affirmed, says Fitch Ratings. Thirteen tranches were upgraded from 10 transactions, following continued strong asset performance, and there were no downgrades or Outlook revisions.

Australia and New Zealand's stable economic environment over the last two years is reflected in the strong asset performance. The stable target cash rate in Australia and decreasing official cash rate in New Zealand helped borrowers service their debt.

The small increase in the average standard variable rate in Australia did not seem to affect borrowers over the quarter. Residential loans also benefitted from the Australian and New Zealand housing markets, in which property price appreciation has been significant over the past couple of years.

The upgrades were to four notes from the auto-loan transaction Series 2013-1 REDS EHP Trust and one note from each of nine Australian prime residential mortgage-backed securities (RMBS) Class B notes.

The Series 2013-1 REDS EHP Trust upgrades reflected strong performance of the underlying pool, with lower losses than Fitch's stressed assumptions and strong excess spread. Credit enhancement increased as a result of sequential payment of the notes. The nine Australian prime RMBS upgrades reflected the build-up of credit enhancement, which was sufficient to support higher ratings.

Australian prime RMBS ratings accounted for most of the affirmations (134), followed by Australian non-conforming RMBS (25), Australian auto ABS (13), New Zealand prime RMBS (7) and Australian small balance CMBS (5). At the end of 1Q16, all publicly rated notes were on Rating Outlook Stable except three notes (Classes C, D and E from Flexi ABS Trust 2014-1) that have been on Rating Outlook Positive since May 2015.

The transactions reviewed during the quarter made up approximately 34% of the Fitch publicly rated Australian and New Zealand SF transactions outstanding at end-4Q15.