Fitch Ratings has predicted further downgradings of non-conforming lenders’ credit ratings in the near future.
Rooftop Mortgages was the first lender to see a tranche of its residential mortgage-backed securities (RMBS) downgraded earlier this year. Fitch Ratings said there were a number of other lenders eating into their reserve funds, which it believed, was a sign that further downgradings could be imminent.
Suzanne L Albers, director of RMBS at Fitch Ratings, said: “A lot will depend on the performances of lenders and property prices. Higher arrears are currently being offset by higher prices but we are seeing more lenders tap into the reserves when they should be growing.”
Albers was particularly concerned by the recent and prospective entrants into the non-conforming market, as these players often deal with borrowers who would feel the pressures on repayments first.
Brian Giles, communications director at Northern Rock,
said: “We only deal in prime-based securities and we don’t believe it will effect us. In fact, we have received over 170 upgrades from credit agencies this year.”
However, Bob Sturges, director of communications at Money Partners, said the sector must note that borrowers are struggling.
“The forecast is not wrong but it must be put in context. Underlying economic conditions remain favourable and most people are servicing their debts well. Most of the pressures are on unsecured debt but many are being sensible and swapping expensive unsecured debt for cheaper secured debt.”
