Progress 2026-2 Trust receives Fitch expected ratings for Australian RMBS issuance

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Progress 2026-2 Trust Fitch ratings

Highlights

Fitch assigned expected ratings to AUD750 million Progress 2026-2 Trust RMBS, backed by 1,269 obligors with a 61.4% weighted-average current LTV.
Liquidity facility sized at 1.0% of invested note balance and excess reserve structure support payment continuity for class A1-S, A1-L, and AB notes rated 'AAAsf'.
Fitch forecasts Australia GDP growth at 2.2% in 2026 and warns that increased defaults could trigger negative rating actions if credit enhancement declines.

Issuance structure and portfolio metrics

As reported by Fitch Ratings, the expected ratings apply to mortgage-backed pass-through floating-rate notes to be issued by Perpetual Trustee Company Limited in its role as trustee of Progress 2026-2 Trust, a separate series established under a master trust deed.

The collateral pool totals AUD750 million and includes 1,269 obligors. Fitch says the portfolio has a weighted-average current loan-to-value ratio of 61.4% and a weighted-average indexed current loan-to-value ratio of 53.6% at the 1 August 2026 cut-off date.

Fitch says payment interruption risk is mitigated by a liquidity facility sized at 1.0% of the aggregate invested note balance, with a floor of 0.10% of the invested note balance. The structure also includes an excess reserve that traps excess available income on and after the first call-option date to cover required payment shortfalls.

Under Fitch's analysis, timely payment of interest and ultimate payment of principal are made to the class A1-S, A1-L and AB notes in all 'AAAsf' rating scenarios.

Economic backdrop and rating risks

Portfolio performance is supported by Australia's continued economic growth and tight labour market. GDP growth stands at 2.1% in the year to June 2026 and unemployment is 4.5% in July 2026, while Fitch forecasts GDP growth of 2.2% in 2026 and 2.0% in 2027, with unemployment at 4.4% and 4.5% respectively.

Fitch says transaction performance may be affected by changes in market conditions and the broader economic environment. Weaker asset performance is strongly correlated with higher delinquencies and defaults, which could reduce credit enhancement available to the notes.

It adds that unexpected increases in default frequency could produce losses above its base case and likely reduce remaining loss coverage for the notes. Lower credit enhancement could leave certain note ratings exposed to negative rating action, depending on the scale of any decline, which is why Fitch conducts sensitivity analysis by stressing initial base-case assumptions.

Our earlier coverage of the Federal Reserve’s first rate increase since 2023 highlighted how even a modest hike can lift borrowing costs for already leveraged U.S. households. It noted that low personal savings and growing reliance on credit tend to amplify delinquency risk during tightening cycles, which can ultimately feed through into weaker consumer spending and broader economic knock-on effects.

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