The Australian mortgage market has been characterised by higher prepayment rates than in other countries, according to a new report by Fitch Ratings. Over the past decade, Australian prepayment rates have ranged from 15 per cent to 25 per cent and this has led to fast amortisation of Australian Prime RMBS transactions in comparison to offshore securitisations, where the prepayment rate, which was at 15 per cent to 20 per cent prior to the Global Financial Crisis, is down to five per cent.Fitch's analysis showed that as of March 2014, the average repayment rate in static mortgage pools of public Australian prime RMBS was 22.2 per cent. This is 3.5 per cent higher than its historic lows in March 2011, which Fitch said was a result of the strong housing market and competitive lending environment. In contrast, Fitch warned that a stagnating housing market and an uncompetitive lending environment were major threats to Australian prepayment rates. Annualised redraw rates over the past 10 years have ranged from three per cent to five per cent of outstanding mortgages, exhibiting little volatility.This same stability has been highlighted by Moody's Investors Service, in a report suggesting the impact of the Australian government's 2014-15 budget on the domestic RMBS and ABS sectors would be "restrained". This is despite the confirmed 16,500 job losses in the government sector, a reduction in family tax benefit B and the introduction of a deficit levy. "Assuming each person that lost their job had a mortgage, we would expect only an additional 0.21 percentage point increase in delinquencies for this portfolio," Moody's said.The geographic diversification of borrowers would also mitigate the negative impact of these policies on both RMBS and ABS, Moody's noted. For example, the RMBS transaction with the greatest regional exposure to government sector employees by current balance, SMHL Series Securitisation Fund 2012-1, has an exposure of less than 10 per cent.Structural features, such as lender's mortgage insurance for RMBS and excess spread, in the case of ABS, would further mitigate losses. "Based on the same assumptions as for RMBS, we would expect only a 0.41 percentage point increase in delinquencies for this portfolio," said Moody's.Further, the rating agency does not expect the new budget's spending cuts to affect any Australian issuer's covered bonds, as loans that are 90 days delinquent are replaced with performing loans in their cover pools. This is to ensure that banks maintain maximum issuance capacity under their respective asset coverage tests.