View more on these topics

Moody’s predicts stable 2012 for UK RMBS master trusts

The performance of UK residential mortgage-backed securities master trusts containing prime mortgages will remain stable in 2012, according to a report published today by Moody’s.

The ratings agency says such trusts will experience only a marginal deterioration this year as a result of the slow economic recovery in the UK.

It says this deterioration will particularly affect master trusts with either a high proportion of buy-to-let or non-conforming collateral, or those with prime collateral with riskier characteristics, due to the limited refinancing opportunities available to such borrowers.

Moody’s reports a stable/deteriorating outlook for the UK prime RMBS sector and a negative outlook for the UK banking sector.

Jonathan Livingstone, senior analyst at Moody’s and author of the report, says: “In 2012, stable collateral performance will be driven by stable house  prices, stable mortgage rates, a relatively small increase in the  unemployment rate and continued lender forbearance.”

But he adds: “We believe there is the potential for the performance on UK prime RMBS  to deteriorate slightly due to reduced government spending and increased taxes. Furthermore, a slowerthan expected economic recovery, which could result from a worsening of the euro area sovereign crisis, would adversely affect performance in the sector.”

The Moody’s report shows the performance of the trusts remained stable in 2011, with three-month arrears for the UK prime RMBS sector remaining around 1.8% over the past 12 months.

Weighted-average repossessions over the past 12 months have increased slightly from 0.25% to 0.29%, which Moody’s says is mainly due to an increase in repossessions in the Granite master trust.

The weighted-average loan-to-value ratio of the trusts has remained fairly constant at 66.5%, although the indexed LTV has increased slightly from 66.9% to 68.9%.

The proportion of borrowers in negative equity has increased from 6.5% in 2010 to 8.3% in 2011.

Additionally, all Aaa rated tranches have maintained their rating since the inception of the trusts.

Recommended

MPC vote unanimous again in January

The Monetary Policy Committee voted unanimously to keep the base rate on hold and maintain the quantitative easing programme at £275bn earlier this month, minutes of the meeting have revealed.

Five ways to invest in the connected world

Smart utility metering; fitness trackers; connected cars; smart factories; precision agriculture: the internet of things encompasses myriad applications. But how do you gain exposure – and profit – from this growing trend, asks Neptune fund manager & CTO Ali Unwin. Read more: Important information Investment risks Neptune funds may have a high historic volatility rating […]

Newsletter

News and expert analysis straight to your inbox

Sign up