Australian residential mortgage backed securities have continued to perform very well. This is reflected in data from a lenders’ mortgage insurance provider and the RMBS market, which show that annual losses on insured prime housing loans averaged 4 basis points between 1980 and 2010, with the highest loss in any one year being 10 basis points.
6 As a result, even the holders of lower rated tranches of RMBS have not suffered any losses, as the insurance, together with the subordination embodied in the RMBS, has provided a more than adequate buffer.