UK non-conforming RMBS remain stable

The performance of UK non-conforming residential mortgage-backed securities remained stable in the three months to August 2013, according to the latest figures released by Moody’s Investors Service.

Moody’s 90+ day delinquency index looks at the percentage of non-conforming mortgages with UK RMBS which have been in arrears for three months or longer. This decreased from 16.1 per cent in May 2013 to 15.8 per cent in August 2013, while outstanding repossessions dropped to 0.6 per cent from 0.7 per cent in the same period.

Weighted average loss severity – which measures the average loss on properties repossessed and sold as a result of payment default – was 28.3 per cent in August 2013, siginficantly lower than its June 2010 peak of 33.4 per cent.

Cumulative losses on residential non-conforming mortgage-backed securities rose by just 10 basis points to 2.5 per cent of the original balance between may and August 2013, while outstanding repossessions decreased from 0.7 per cent of the non-conforming sector to 0.6 in the same period.

However, Moody’s asserts that future performance remains uncertain due to low redemption rates – 5.5 per cent in August 2013 compared with pre-2009 levels of between 20 and 40 per cent – with the ratings agency saying the lower rates of redemption mean portfolios will remain outstanding for a “significant time”.

Buy-to-let RMBS also showed stable performance in the three-month period ending in August 2013 with the 90-plus day delinquency index relatively unmoved at 0.88 per cent compared with 0.90 per cent in the three months ending May 2013.

Outstanding repossessions decreased from 0.13 per cent in May 2013 to 0.11 per cent in August.