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Delinquencies no threat to capital markets

by Staff Reporter10 minute read
The Adviser

Rising delinquencies are insignificant to any recovery in capital markets, according to Fitch Ratings’ Ben McCarthy.

A report released by Fitch Ratings on Friday indicated that delinquency rates were set to increase as interest rate rises from earlier this year take their toll on borrowers.

Ben McCarthy, managing director of structured finance with Fitch, told Mortgage Business that the forecast delinquencies did not spell bad news for the capital markets however.

“Investors are well aware of delinquencies – they are known and expected,” he said.

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Mr McCarthy said that overall delinquencies still remain low and this “should make investors comfortable”.

Mr McCarthy also commented that recent conditions would result in a new vintage of loan deals that would be of better credit quality than those in recent times.

“A lot of lenders have retreated to better customers... so portfolios will actually be of better quality than those from a year ago,” Mr McCarthy said.

“Given also that there haven’t been many deals in recent months, mortgages will have better seasoning and be of better quality,” he said.

McCarthy also said that the Fitch report, which analysed mortgage delinquencies by postcode, highlighted the importance of geographic diversity in RMBS portfolios.

“I think it’s something we will see investors – and ourselves – focus more on ,” he said.

The report found that mortgage stress was low in most areas, but rife in certain geographic locations.

Published: 02-06-08

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