Delinquencies in U.K. credit card trusts hit a new high in December 2008, according to Fitch Ratings.
The rating agency reported that delinquencies of 60 to 180 days increased through 4Q08 to 4.3% in December from 3.8% in September 2008. This marks a historical high for the index and reflects many more consumers struggling to make regular payments on their credit cards in recent months.
Between September and December 2008, each of the trusts included in the index, with the exception of Cumbernauld, reported increasing delinquencies and charge-offs. The Fitch Charge-off Index (Fitch CI) rose to 7.2% in December 2008 from 6.6% in September 2008. While the improvements in performance of the Cumbernauld trust display a trend which suggested the market's outperformance, Fitch noted that recent changes to the debt management program operated by Barclays could have influenced part of this improvement.
The latest IVA and bankruptcy numbers, released by the Insolvency Service on Feb. 6, have pointed toward further signs of consumers struggling to repay their debts and needing to resort to filing for insolvency. Notably, bankruptcies are up by 24.6% and IVAs 11.6% in 4Q08 on the 4Q07 data. On the back of rising unemployment and recent announcements of further job loses, Fitch is still concerned that more cardholders could struggle making repayments on their cards in 2009.
"Although the increased delinquencies have been expected in the current difficult economic environment, the magnitude and speed of deterioration, together with these latest increases in the IVA and bankruptcy filings are concerning trends," said Steven Webber, associate director in Fitch's European structured finance group. "Due to these factors and the wider economic difficulties facing U.K. consumers, our expectation is for further performance deterioration amongst U.K. credit card ABS in 2009."
Most junior notes of U.K. credit card ABS transactions have already been individually assigned a Negative Outlook, suggesting the likely direction of any rating change over the next one to two years would be negative.
