Mortgage delinquencies in prime or conforming loans has improved for the most part of the fourth quarter of 2009, however, low doc arrears worsened according to Fitch Ratings Dinkum Index - Q409.

Defaults in the 30-59 day bracket among non-conforming low-doc borrowers, increased by over 50%, according to Leanne Vallelonga, associate director in Fitch's Structured Finance RMBS team. 

"Though non-conforming borrowers represent a small portion of the market, as expected they were the first to be impacted by the increases in interest rates which took place in Q409. Further deterioration is expected," she said.

Prime/conforming delinquencies improved for the most part in Q409, with 30+ day arrears falling to 1.19% from 1.21% in Q309. Fitch Ratings noted in its report that low-doc, both conforming and non-conforming, 30+ day arrears worsened in the quarter.

"Non-conforming low-doc arrears deteriorated to 16.47% from 15.59% in Q309, with conforming low-doc arrears deteriorating to 4.82% from 4.72% in Q309. These increases are mainly due to rises in the 30-59 day buckets, where conforming low-doc arrears rose by 28% from Q309 and non-conforming low-doc arrears rose by 50% from Q309," the report said.

Improvements were seen across all 90+ day arrears categories, which Fitch believes is due to the rebound in property prices during the latter half of 2009, improving lenders' ability to sell properties. Fitch expects some increase in arrears across all products through 2010, brought about by Christmas seasonal credit card spending (a factor specific to Q110), increasing interest rates and the risk of higher unemployment as the year progresses.

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