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Yahoo Finance Plus Moody's - UK home loan arrears stay low after payment holidays, credit positive for covered bonds and RMBS
Research Announcement:
Moody's - UK home loan arrears stay low after
payment holidays, credit positive for covered bonds and RMBS
London, March 22, 2021 --
» Prime mortgage arrears did not increase after payment holidays ended in the second half of 2020
» Arrears expected to rise when government support measures end
Most UK home loan borrowers who took coronavirus-related payment holidays in 2020 have
restarted payments, keeping mortgage arrears rates low, a credit positive for UK covered bonds and
residential mortgage-backed securities (RMBS), Moody’s Investors Service said in a report today.
Performance data for UK covered bonds and RMBS master trusts shows prime mortgage arrears did
not increase after payment holidays ended in the second half of 2020.
“Almost all UK borrowers who took payment holidays on their home loans during the first wave of the
coronavirus crisis had resumed payments by the end of 2020,” said Edward Manchester, a Moody’s
Senior Vice President and the report’s co-author. “This is credit positive for UK covered bonds and
RMBS because it shows that payment holidays did not conceal a rise in nonperforming loans.”
There had been a risk that payment holidays would conceal nonperforming loans (NPLs) and that
consequent delays in classifying payment holiday loans as NPLs could weaken the effectiveness
of structural protections in covered bond and RMBS transactions. Since most payment holiday
borrowers have resumed their payments, these potential problems have not materialised.
Temporary government policy measures, such as furlough payments, have supported borrowers to
make mortgage payments during the pandemic. As this support is withdrawn, Moody’s expects that
arrears will rise. The extent of the risk depends on how well the UK economy – and particularly the
employment market – recovers over the coming months.
After 31 March 2021, UK mortgage borrowers will no longer be able to apply for coronavirus
payment holidays.
Subscribers can access the report at:
http://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBS_1269977
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updated credit rating action information and rating history.
Edward Manchester
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
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Client Service: 44 20 7772 5454
Nicholas Lindstrom
Associate Managing Director
Structured Finance Group
Moody's Investors Service Ltd.
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