The performance of the UK non-conforming residential mortgage-backed securities market has been stable in the year to March 2011, according to Moody’s Investor Service.
Moody’s found the proportion of loans in arrears of 90 days or more across 75 outstanding non-conforming RMBS transactions decreased from 19.3 per cent to 17.3 per cent in the year to March, which is below the peak of 21 per cent in June 2009.
On an annual basis, redemption rates dropped to a historical low of 5.4 per cent from 7.9 per cent, indicating that the portfolios will remain outstanding for a longer period of time, which Moody’s says will “exacerbate future performance uncertainty”.
Poor economic growth, high but stable unemployment and a potential 0.25 per cent increase in bank rate before the end of 2011 and 1 per cent in 2012 has led Moody’s to believe the outlook for UK non-conforming RMBS is negative.
John Charcol senior technical manager Ray Boulger says: “Due to the prospect of a rate rise receding, I would say the outlook for sub-prime borrowers today is rather better than it was a few months ago. By definition, that class of borrower is more at risk of arrears but I do not think that risk has increased.”