Mortgage arrears on the rise

Mortgage arrears in the UK subprime mortgage market have continued to increase, according to the latest analysis from Standard and Poor's.

The credit rating agency reports some 23.31 per cent of all subprime mortgages were in arrears during the second quarter of the year - up from 22.17 at the end of the first quarter.

Following analysis of the performance of securities backed by so-called nonconforming mortgages, Standard and Poor's also finds seriously delinquent loans - those overdue by over three months or more – have increased to 12.12 per cent of the total.

The Standard and Poor's report describes arrears as "a way of life" for many subprime borrowers, blaming the situation on "a sharp contraction in refinancing options for borrowers and stricter lending criteria."

Around 80 per cent of subprime mortgages have been packaged into securities and sold to third-parties.

In a perhaps more worrying indicator for the market, delinquencies also continue to rise among prime mortgages.

Total delinquencies in the UK mortgage market were 2.94 per cent of all loans at the end of June this year, against 2.33 per cent at the end of the first quarter.

Serious delinquencies stood at one per cent of total portfolios.

Different lenders are experiencing different levels of arrears, with Bank of Scotland and Northern Rock citied by the credit rating agency as among those experiencing the strongest impact.

Chris O'Toole