No Increase Likely In Home Loan Defaults In 2018, Says Moody's
The delinquency rate in commercial vehicle loans and home loans is likely to remain stable in 2018, aided by healthy economic growth, says a report.
“The country's auto asset-backed securities (ABS) backed by commercial vehicle loans issued in 2018 will have positive credit characteristics that, along with healthy economic growth, will support the performance of these deals," Moody's said in a report today.
"We expect delinquency rates for commercial vehicle loans backing outstanding auto ABS will remain stable at around 5.4 per cent for loans on new vehicles and 6.8 per cent for loans on used vehicles in 2018, supported by healthy economic growth," the report said.
Auto ABS, backed by commercial vehicle loans, account for around 45 per cent of the total volume of outstanding ABS in the country, and the agency expects such deals will continue to account for a significant proportion of issuance in 2018.
In the residential mortgage-backed securities (RMBS) sector, it expects delinquencies to remain around low levels of one per cent in 2018, with stable interest rates and home prices supporting performance. The majority of mortgage borrowers in the country are salaried employees with steady earnings and mainly use these loans to buy properties for self-occupation, which signifies that such borrowers have a good credit profile, it said.
The report, however, said delinquency rates in ABS deals backed by loans against property (LAP) to small and medium enterprises (SMEs) would increase in 2018 because of the tougher operating environment.
"The introduction of the Goods and Services Tax in July this year and the government's demonetisation policy have placed stress on the SME sector," the report said. However, the credit quality of new Indian ABS backed by LAP to SMEs will benefit from more stringent underwriting standards applied by lenders over the past year.
The more stringent underwriting standards for LAP reflected a more cautious approach by lenders in view of rising delinquencies and the subdued operating environment for SMEs, the agency said.
With inputs from Housing News