Prime arrears on the rise
Arrears of more than 90 days on prime residential mortgage-backed securities have doubled from the level recorded by the Moody’s index last year, going from 0.9% in Q2 2008 to 1.8% in Q2 this year.
Repossessions have eased off slightly from last year’s levels, with the Moody’s UK prime RMBS indices for Q2 recording a repossession trend of 6.6 basis points compared with 8.0 basis points at the same time last year.
The dearth of the remortgage market, together with the rise in unemployment, means that prime borrowers will find it increasingly difficult to meet their mortgage payments, Moody’s says.
Daron Kularatnam, senior associate at Moody’s and co-author of the report, says: “Before the economic downturn borrowers were able to refinance their way out of arrears problems or sell their property.
“The combination of increasing unemployment and lack of financing options if borrowers are experiencing mortgage problems has led to worsening performance as borrowers that are forced to revert to the lender’s SVR may suffer a payment shock.”