S&P revisits mortgage fund sector
Standard & Poor’s (S&P) has released new findings on the mortgage fund sector, which suggests the lending environment continues to be challenging.
The report, “Sector Update: Australian Fixed Interest-Mortgage Funds”, outlines important developments since S&P undertook the same review for the first time a year ago.
Apart from a handful of name and ratings changes, the sector is in a similar difficult position to that experienced 12 months ago, when median retail conventional mortgage fund managers found it hard to provide excess returns.
Recent interest rate rises saw this situation improve, however, the median conventional mortgage fund manager continues to underperform the benchmark.
Retail high-yield funds have not experienced the same issues, however, it is important to note that they are more risky than the conventional mortgage fund.
Another key finding of the review was that loan defaults are becoming more prevalent, although few losses have been incurred.
Note: S&P has changed the name of the conservative mortgage fund subgroup to ‘conventional’.
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