RMBS take a tumble

by AB26 Aug 2013

Residential mortgage-backed securities (RMS) experienced a downturn during the second quarter of this year, as the prime 30-day plus arrears rate fell, according to research group Moody’s.

The overall rate fell to 1.52% in June, dropping from 1.67% in March and 1.56% in June 2012.

All issuer groups experienced the fall, with the exception of regional authorised deposit-taking institutions.

Moody's says the low interest rate environment is just one of the factors keeping arrears rates down, as well as reducing the size of borrowers' repayments.

As a result, the chances of a borrower falling into arrears has dropped, which the group expects is a situation that will be around for some time.

The 30-day plus arrears rate for RMBS deals that consist completely of low-doc loans has also increased slightly over recent years, reaching a record high of 6.24% in January this year, before slipping to a nine-month low of 5.26% in June.