RMBS and mortgage stresses: Modelling the impacts of stress scenarios

Australian household finances are under increasing pressure with monetary policy tightening and rising costs of living. This is testing the ability of mortgage holders to service their loans, which has implications for the housing market and the performance of residential mortgage-backed securities (RMBS). We anticipate that mortgage arrears and default rates will rise from their current levels and we have modelled various stress scenarios on rated notes in a recent prime RMBS transaction to assess the implications of this economic environment on these securities.