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New mortgage rules will boost markets

Your Mortgage
Written By:
Your Mortgage
Posted:
Updated:
05/11/2012

The Mortgage Market Review rules, set to be implemented in April 2014, will bolster the market’s perception of prime mortgage securities, said a credit ratings agency.

 

 

A Moody’s report said in contrast, the perceived outlook for non-conforming or specialist securities like interest-only will suffer.

 

Affordability checks will improve credit performance because prime borrowers will be expected to offer proof of income, for example, de-risking the investments in contrast with those involving more specialist or non-conforming borrowers.

 

Sophia Velissaratou, a Moody’s associate analyst and a co-author of the report, said:

“The new rules will be credit negative for UK non-conforming RMBS over the long term, as it will be more difficult for these weaker borrowers to take advantage of proposed waivers on affordability checks.”

She said: “As such, these borrowers will continue to have extremely limited refinancing options.”

 

Senior analyst, Jonathan Livingstone, added that lenders have already tightened underwriting criteria significantly reducing refinancing options for interest-only borrowers, but the setting of a concrete implementation date for the rules removes further short-term uncertainty.


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