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Buy-to-let RMBS arrears rocket

UK buy-to-let delinquencies on mortgage backed securities increased significantly during Q1 2009, according to Moody’s Investors Service.

In its latest index report for the UK buy-to-let residential mortgage-backed securities sector, the credit rating agency found that three-month arrears were up to 3.55 per cent, from 2.42 per cent in December 2008.

However, Moody’s found that the arrears figures were severely hampered by Bradford & Bingley’s Aire Valley Master Trust, which if excluded from other RMBS arrears rates, would mean the overall rate fell to 1.71 per cent this quarter.

Moody’s warns that with the economy in recession and unemployment rising, tenant demand and tenant’s ability to make timely payments will be tested over the coming quarters.

Moody’s economist Nitesh Shah says: “Whilst the UK buy-to-let sector has historically maintained a strong performance, this is the first time the sector has experienced a recession with falling house prices and rising unemployment.

“However, although the level of arrears is rising, it remains within expected levels. Given that buy-to-let properties are not primary residences of the owners there may be a rise in prepayments as buy-to-let investors decide to cash in their investment and lock into the capital gain. However, the total redemption trend does not yet show any signs of buy-to-let borrowers exiting the market.”


Light relief

Last week, I considered proposals for a 50 per cent income tax rate, the restriction of higher-rate tax relief on pension contributions for those with a taxable income of over £150,000 and the removal of personal allowances for those with an income exceeding £100,000.


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