Home loan arrears improved overall in June 2006 from May 2006, though the most severe category of home loan arrears - those where borrower repayments are more than three months overdue - shows a deteriorating trend.Credit ratings agency Standard & Poor's on Friday said that its measure of all home loan arrears of 30 days or more on "prime" home loans eased to 1.14 per cent out of a stock of $135 billion in securitised home loans monitored by S&P. The ratings agency refers to this measure as the SPIN index.The S&P SPIN for prime loans in Australia peaked at 1.20 per cent in January 2006. The 12-month low in the index was 0.94 per cent in September 2005.For "full documentation" loans, where lenders undertake reasonable inquiries into a borrower's ability to repay, arrears declined for the fifth month out of six, since peaking at 1.07 per cent in January 2006. Arrears of 30 days or more on prime loans are now 0.99 per cent of loans.S&P said the arrears on low documentation loans improved during the month, with arrears of more than 30 days declining to 2.22 per cent out of $16 billion in low doc loans. Arrears stood at 2.33 per cent in May, the highest level recorded by this series. The 12-month low was 1.72 per cent, recorded in August and November last year.The ratings agency said, though, that an increase in the amount of low doc loans may "slightly mask the true level of underlying arrears on low doc loans".When divided by type of lender, the most significant level of arrears continues to be within those loans originated by non-bank lenders such as GE Money, Rams and First Mac.However, S&P changed its definition of non-bank lenders for the purpose of analysing arrears data for June. S&P now groups loans funded by Macquarie Securitisation (for Aussie Home Loans among other lenders) within the "other banks" category. Meanwhile S&P said the SPIN index on non-conforming loans, such as those originated by Liberty Financial and Bluestone, fell to 10.62 per cent in June 2006, down from 12.79 per cent in May 2006, and compared with a 12-month high of 13.29 per cent in April.