Fitch’s findings come after the FSA proposed to ban all mortgages where income is not verified in its mortgage market review.
A study of more than 700,000 UK residential mortgage loans by Fitch Ratings has found that fast-track mortgages in the prime sector do not appear generically more risky than income-verified prime loans.
In fact, Fitch found that in most cases, fast-track loans are less likely to default than fully-income verified mortgages.
However, Fitch says that by contrast, self-certification mortgages in the non-conforming sector invariably turn out to be more risky than those originated with certified income.
Fitch European Residential Mortgage Backed Securities managing director Gregg Kohansky says: “Lenders typically apply stricter credit scoring criteria for fast-tracked mortgages than for fully verified loans so the results are not necessarily suprising.
“However, for Fitch to treat these loans on a par with one another in our ratings analysis for specific transactions, the agency will need to perform a detailed performance assessment showing this relationship holds.”