Moody's Investors Service has warned that housing affordability for new borrowers - measured as the proportion of household income needed to meet mortgage repayments - deteriorated on average across Australia over the year to September 2017.In addition to housing market imbalances, the large build-up of household debt continues to pose risks to the performance of RMBS, Moody's said. Australia's household debt as a percentage of household disposable income is at a record high 194 per cent. "Despite the decline in affordability generally, for both detached houses and apartments, the situation varied between different capital cities, with the situation improving in Sydney, Perth and Adelaide, and deteriorating in Melbourne and Brisbane," said Alena Chen, a senior analyst at Moody's."The improvement in Sydney, which resulted from a slight decline in prices from high levels, is a positive development in a city where housing affordability has deteriorated considerably since 2012."However, with affordability deteriorating, on average, on an Australia-wide basis, we believe housing market imbalances and the large build-up of household debt continue to pose risks to the performance of Australian residential mortgage-backed securities," she said.High debt levels make households more vulnerable to economic or housing market shocks, and make meeting mortgage repayments more difficult, increasing the risk of delinquencies and defaults.The housing market in Sydney has shown signs of cooling since the introduction of regulatory measures to curb the origination of interest-only loans and housing investment loans.However, with prices in other cities such as Melbourne continuing to increase, the long term efficacy of regulatory measures in moderating price appreciation remains to be seen.By contrast, in Sydney (the least affordable city) a 10 per cent change in housing prices results in a 3.6 percentage-point change in the percentage of household income needed to meet mortgage repayments, the most of any Australian city.Meanwhile, S&P Global Ratings is reporting that the number of delinquent housing loans underlying Australian prime residential mortgage-backed securities fell to 1.10 per cent in August from 1.17 per cent in July.According to the report on RMBS arrears statistics, "the nonconforming sector fell to 4.48 per cent in August from 4.80 per cent in July, despite a decline in outstanding loan balances during the month. The largest improvement was recorded for mortgages that were 31 to 60 days in arrears."