OREANDA-NEWS. March 31, 2016. Mortgage performance across lenders in Australia has converged over the last two years as a result of low interest rates, increasing competition and tighter lending standards, Fitch Ratings says in a new report.

Smaller authorised deposit-taking institutions (ADIs) continue to be the best performing lenders due to conservative underwriting and geographical focus, with arrears of around 0.5% in 2015. Mortgage performance of the Big 4 banks and other ADIs were stable at 0.9% and 1.2%, respectively.

Recent standardisation of serviceability tests, dissipation of riskier products, such as low-documentation loans, and changes in investment loan treatment have fed competition among ADIs, especially in the owner-occupier segment.

This led to an overall fall in arrears and a convergence of mortgage performance, particularly between non-ADIs and other ADIs. Arrears for non-ADIs, which have been historically 2-3 times higher than those of ADIs, have averaged 1.25% since January 2014, only 5bp above that of other ADIs.

An interest rate hike may highlight borrowers that are more susceptible to interest-rate changes and may result in a divergence of mortgage performance between non-ADI and ADI lenders.

The full report, which is part of Fitch's "Asia-Pacific Structured Finance Chart of the Month" series that highlights topical issues in the region, can be found at www.fitchratings.com or by clicking the link in this media release.