A fall in non-conforming loan delinquency levels in the December quarter should not be read as an indicator that mortgage stress is easing, a Moody's report said.Moody's issued its fourth quarter 2007 Australian non-conforming RMBS performance review yesterday, reporting that average 90 days past due delinquency dropped to a 16 month low of 5.76 per cent, down from 6.27 per cent in the September quarter. Adjusted for the impact of new issuance (Pepper and Bluestone had RMBS issues in the December quarter) underlying 90 days past due was 6.18 per cent, down from 6.87 per cent in the September quarter.The 30 days past due delinquency rate was 11.1 per cent in November and rose to 12.16 per cent in December.Moody's said: "Despite the easing trend in recent delinquency performance, Moody's expects delinquency levels to rise in forthcoming quarters. Interest rate rises are likely to place more borrowers under increased mortgage repayment stress."Delinquent borrowers may have difficulty refinancing their loans due to the liquidity disruption in the wholesale funding market."Moody's believes the long-term upward trend in delinquency rates of Australian non-conforming RMBS is directly linked to the appearance of riskier mortgage products and difficulties experienced by borrowers in servicing debt."The ratings agency said that to date the performance of the non-conforming sector remained within expected levels and did not warrant ratings action.Moody's said the seasoning of non-conforming loans was particularly relevant to expected performance. The performance of loans from the 2005 ad 2006 vintages is weaker than loans from earlier vintages. The 2007 vintage "continues to display a weakening performance" and is yet to reach its peak delinquency level.Of the four originators whose performance is analysed separately, Pepper Homeloans had the best figures, with 7.19 per cent of its aggregate pool 30 days past due in December.Adelaide Bank had 9.81 per cent of its aggregate pool 30 days past due, Bluestone Group had 12.54 per cent of its pool 30 days past due and Liberty Financial had 14.84 per cent of its pool 30 days past due.