RDP 2020-03: The Determinants of Mortgage Defaults in Australia – Evidence for the Double-trigger Hypothesis Appendix A: Summary Statistics and Variable Definitions

Michelle Bergmann

July 2020

Table A1: Summary Statistics
Estimation samples
  First-stage sample(a)   Second-stage sample(b)
All loans Entered arrears Repaid All loans Foreclosure Cured or repaid
Median loan balance 335,600 355,900 337,300   296,100 299,500 293,200
Median indexed LVR(c) 67 72 64   65 81 62
Negative equity (share)(c) 3 7 1   7 26 4
Original LVR >80 (share) 21 37 23   36 47 34
Median repayment-to-income ratio 18 22 18   21 19 21
Median regional unemployment rate 6 7 6   7 8 7
Mining region (share) 13 26 10   28 57 24
Self-employed (share) 17 22 16   25 28 25
Multiple debtors (share) 66 55 67   57 49 58
Investor (share) 32 28 31   26 38 24
IO (share) 26 26 34   22 31 23
Full documentation (share) 98 93 98   93 90 93
No of loans 1,707,000 19,500 428,300   42,600 2,500 27,500

Notes: (a) All loans originated in 2013 onwards; statistics measured at report date
(b) Loans' first observed 90+ day arrears event, including loans originated prior to 2013; statistics measured at time of arrears event
(c) Original housing valuation updated using regional housing price data (see Section 3.2)

Sources: ABS; Author's calculations; CoreLogic data; RBA; Securitisation System
Table A2: Key Variable Definitions
Variable name Variable definition Unit Sources
Indexed scheduled LVR Scheduled balance / (most recent property valuation x SA3 region housing price index) Loan CoreLogic data; Securitisation System; Author's calculations
Debt serviceability ratio Monthly loan repayments, estimated using credit foncier formulas / total borrower income at origination, indexed by state average weekly earnings Loan ABS; Securitisation System; Author's calculations
Loan type transitions Calculated with six month lags of loan type and interest-only expiry date Loan Securitisation System; Author's calculations
Buffer Maximum number of months of excess repayments, lagged 12 months Loan Securitisation System; Author's calculations
SEIFA Index of Socio-economic Advantage and Disadvantage, using Census measures such as educational attainment Postcode ABS
Unemployment rate SA3 region unemployment rate as at the 2016 Census for individuals that resided in the region as at the 2011 Census (to account for migration between SA3 regions) SA3 region ABS
Mining region SA3 region with at least 3 per cent of employment in the mining industry or with at least two copper, iron ore or coal mines SA3 region ABS; Geoscience Australia; Author's calculations
Turnover ratio Annual number of sales / estimated number of properties; trend SA3 region CoreLogic data; Author's calculations

Definitions of additional variables from the Securitisation System are available at <https://www.rba.gov.au/mkt-operations/xls/consolidated-rmbs-reporting-guidance.xls>.