Mortgage and credit card delinquencies rising

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Mortgage and credit card delinquencies rising

22/05/2008 21:17

LONDON (Reuters) - Delinquencies on prime and non-conforming UK mortgages and on credit cards are rising as lending conditions tighten and the economy weakens, Standard & Poor’s said in reports on bonds backed by these assets.

For non-conforming mortgages -- those to borrowers with poorer credit histories -- delinquencies rose to 21.73 percent in the first quarter, from 19.41 percent in the fourth quarter of 2007, S&P said on Thursday.

Delinquencies of more than 90 days moved into double digits, at 10.6 percent.

"A reduction in refinancing opportunities for borrowers, the large proportion of loans (approximately 25 percent) due to revert from fixed or discount rates in the first half of 2008 into an environment of reduced credit availability, and the slowing economy are likely to keep delinquency figures high for the foreseeable future," S&P analyst Kate Livesey said.

Losses remain low, but are rising, S&P said, and are appearing earlier in the life of some transactions.

For mainstream prime mortgages, total delinquencies rose to 2.41 percent in the first quarter from 2.11 percent, the ratings agency said.

In the credit card market, charge-offs -- the point at which the lender regards the debt as bad -- rose to 6.51 percent in March from 6.17 percent in December, while delinquencies rose to 5.88 percent from 5.6 percent.

"Lenders have introduced more cautious lending strategies, causing delinquencies to increase as borrowers start to feel the effects of the downturn in the UK economy," S&P said.

However, it said the jump in the charge-off rate could be explained by the acquisition by Barclays of the Goldfish credit card unit, with a change in the unit’s charge-off policies to align them with those of Barclays.

(Reporting by Richard Barley; editing by Sue Thomas and David Hulmes)

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