Fitch sees arrears rise by 11.63% in UK RMBS

Fitch Ratings has discovered an upward trend in arrears and repossessions in UK residential mortgage backed securities in Q2 2008.

Arrears rose 11.63% in the quarter to now to account for 12.1% of the balance of all mortgages included in the Fitch UK non-conforming index – equivalent to approximately £3.4bn.

Loans currently in possession rose to 2.18% from 1.78%.

This continues the rise seen over the last year.

Peter Dossett, associate director of Fitch’s RMBS team, says: “Loans in arrears continue to increase as a proportion of outstanding non-conforming mortgages.

“This is being driven by greater adverse selection than seen in the past, where borrowers who are able to refinance are doing so, leaving the non-performing loans in the pool and therefore increasing the pressure on the transactions.”

Fitch says it will continue to monitor the performance of the UK non-conforming RMBS over the next quarters to see the effects of a challenging market environment on each transaction.