Borrow
Growing disaster risk to credit quality
The risks of climate change and the “increasing frequency and severity” of natural disasters have highlighted growing risks to the credit quality of Australian mortgages.
Growing disaster risk to credit quality
The risks of climate change and the “increasing frequency and severity” of natural disasters have highlighted growing risks to the credit quality of Australian mortgages.
A report released by Moody’s investor Service has warned that natural disasters are increasing the risk of Australian residential mortgage-backed securities (RMBS), in light of the current bushfire crisis.
“The size and the scale of the bushfires are unprecedented, with around 11 million hectares burned and over 1,900 residential dwellings destroyed so far, but our rated RMBS have limited exposure to the affected loans,” said Alena Chen, Moody’s vice president and senior analyst.
However, the ratings agency added that at present, the number of homes destroyed by the natural disaster comprise of a “small proportion” of the overall residential housing stock in Australia, with exposure to loans on bushfire-affected properties “low” among the securities rated by Moody’s.
“We therefore expect that while mortgage delinquencies will increase in affected areas because of the economic disruption and damage caused by the fires, this will not materially hit RMBS portfolios,” Moody’s stated.
“Around 6.7 per cent of loans in RMBS we rate are on properties in fire-affected areas, but the actual share of loans that will be negatively affected by the fires – either because the underlying properties have been damaged or destroyed or because of the economic disruption caused by the disaster – is likely to be much smaller.
“Recent natural disasters have all had limited and temporary impact on the performance of our RMBS portfolio.”
The increasing frequency of natural disasters is also having an impact on Australia’s credit rating of both the federal and state governments, the agency said.
Moody’s said that over time, the frequency and severity of natural disasters related to climate change will be a recurring cost for Australia, although it added that the country currently has capacity to deal with such a crisis.
Currently, the Australian government has announced that it is committing an additional $2 billion over two years to set up a natural bushfire recovery agency.
RELATED ARTICLES
About the author
About the author
Loans
The mortgage-regret economy: Why borrower confusion is reshaping Australia’s home-loan playbook
Mortgage regret has become a measurable market force, driving record refinancing, rising arrears off a low base, and a scramble by lenders and brokers to redesign the borrower journey. With the ...Read more
Loans
SME lending becomes the new gold rush as banks shift focus beyond home loans
Mortgage broking is maturing, and the next growth curve is hiding in plain sight: small business credit. With Australia’s SME lending pool topping roughly $631 billion in early 2024 and growing at ...Read more
Loans
First-home buyers' $31k blunder reshapes Australia's mortgage game
Australia’s $11.6 trillion housing market is booming again, but so are regrets among first-time borrowers who moved too quickly. A new wave of early refinances, broker-led interventions and lender ...Read more
Loans
ANZ’s self-employed rethink: mainstreaming cashflow credit in Australian mortgages
ANZ’s policy shift for self-employed borrowers is more than a documentation tweak — it’s a signal that cashflow-based underwriting is moving into the mainstream. Read more
Loans
Navigating the Australian student loan landscape: Options for financing your education
Securing financing for post-secondary education is a significant step for many Australians, offering a pathway to advancing career prospects and achieving personal growth. Read more
Loans
Secured vs. unsecured personal loans: Which is right for you?
When considering a personal loan in Australia, one of the first decisions you'll face is whether to opt for a secured or an unsecured loan. Each type has distinct advantages and drawbacks, and the ...Read more
Loans
Weighing up interest-only home loans: What Australian borrowers need to know
Interest-only home loans have become a topic of considerable interest among Australian borrowers, offering a unique approach to home financing. This type of loan allows borrowers to pay only the ...Read more
Loans
Bridging loans demystified: Navigating your next property purchase in Australia
Navigating the property market can be daunting, especially when timing issues arise between selling your current home and purchasing a new one. Bridging loans offers a solution, providing the ...Read more
Loans
The mortgage-regret economy: Why borrower confusion is reshaping Australia’s home-loan playbook
Mortgage regret has become a measurable market force, driving record refinancing, rising arrears off a low base, and a scramble by lenders and brokers to redesign the borrower journey. With the ...Read more
Loans
SME lending becomes the new gold rush as banks shift focus beyond home loans
Mortgage broking is maturing, and the next growth curve is hiding in plain sight: small business credit. With Australia’s SME lending pool topping roughly $631 billion in early 2024 and growing at ...Read more
Loans
First-home buyers' $31k blunder reshapes Australia's mortgage game
Australia’s $11.6 trillion housing market is booming again, but so are regrets among first-time borrowers who moved too quickly. A new wave of early refinances, broker-led interventions and lender ...Read more
Loans
ANZ’s self-employed rethink: mainstreaming cashflow credit in Australian mortgages
ANZ’s policy shift for self-employed borrowers is more than a documentation tweak — it’s a signal that cashflow-based underwriting is moving into the mainstream. Read more
Loans
Navigating the Australian student loan landscape: Options for financing your education
Securing financing for post-secondary education is a significant step for many Australians, offering a pathway to advancing career prospects and achieving personal growth. Read more
Loans
Secured vs. unsecured personal loans: Which is right for you?
When considering a personal loan in Australia, one of the first decisions you'll face is whether to opt for a secured or an unsecured loan. Each type has distinct advantages and drawbacks, and the ...Read more
Loans
Weighing up interest-only home loans: What Australian borrowers need to know
Interest-only home loans have become a topic of considerable interest among Australian borrowers, offering a unique approach to home financing. This type of loan allows borrowers to pay only the ...Read more
Loans
Bridging loans demystified: Navigating your next property purchase in Australia
Navigating the property market can be daunting, especially when timing issues arise between selling your current home and purchasing a new one. Bridging loans offers a solution, providing the ...Read more
