Mortgage arrears stabilised during the September quarter and are expected to fall as the impact of the central bank’s recent interest rate cuts reach borrowers, Fitch Ratings says.

The global ratings agency’s 30 day delinquency index, which measures repayments on home loans that are more than 30 days past due, was 1.52 per cent by September 30, down 17 basis points on the previous quarter.

Delinquencies for repayments more than 60 and 90 days overdue also improved on their June quarter performance.

Fitch’s index tracks the arrears of mortgages underlying Australian residential mortgage-backed securities.

Arrears crept off their historic lows in 2010 and tracked higher in the March 2011 quarter.

They stabilised in the September quarter, in part because the Reserve Bank of Australia’s (RBA) overnight cash rate had been stable at 4.75 per cent for 11 months, allowing borrowers time to adjust their finances, Fitch said.

Two consecutive interest rate cuts by the RBA in November and December may further help borrowers to service their debt during the festive and holiday season when arrears are traditionally at their highest, the agency added.

“Mortgage performance is expected to continue its improvements in the December 2011 quarter, further assisted by the recent interest rate decreases in November 2011, with the December 2011 decrease having more of an impact in the March quarter of 2012,” analyst Courtney Miller said.

The big four banks and many smaller lenders have cut their variable home loan interest rates in line with the RBA’s recent rate movements.