Remortgages enter risky loan category

| August 17, 2009 | 0 Comments

Moody’s Investor Services has categorised remortgages as having “adverse loan characterisics”, indicating that they carry some of the risks associated with a high default rate.

In a recent report entitled “What drives UK mortgage loans to default” the credit rating agency places remortgages alongside other risky loans, based on data gathered on mortgages that originated in or before 2008.

The firm also names high LTV loans, loans to self-employed borrowers, self-certified loans and those made using a fast track process without full income verification as sharing adverse characteristics plus buy-to-let and interest only mortgages.

Other mortgages that could join the list include those on high value properties; properties without full internal valuations and those made to borrowers close to retirement age, although at this point the report only signals that the risk of arrears could increase for this group if the economic downturn continues.

First-time buyer and high income multiple mortgages could also become riskier, with lenders particularly losing out if they are forced to repossess, rather than through an increase in missed payments.

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