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.