the risk of mortgage lending
A highly rated agency will today report
that mortgage lending criteria has been "relaxed" in riskier
areas of the mortgage sector mainly buy-to-let and subprime lending
to people with bad credit history.
Standard & Poor's feel if the UK housing and mortgage markets
slacken, lenders with positive exposure to specialist mortgage
lending could feel the result.
The ratings agency commented: "Current arrears are manageable
because customers are quickly able to refinance to prime products
and cheaper pricing."
"UK mortgage borrowers are exposed because
they are highly levered, while UK house prices are volatile and
can fall. It could be argued that the spurt in house prices over
the past year or so, when a prolonged soft landing seemed more
likely, could make a more painful outcome more likely."
S&P highlights the potential risks in sectors such as self-certified
mortgages, where customers could easily false their income.
Even though buy-to-let lending "warrants caution", it is mainly
to be of "significantly greater risk than the prime market and
the key factor here is likely to be house price inflation".
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