Moody's Investors Service in its latest index report for U.K. nonconforming mortgages said that, over the coming quarters, two factors will drive deliquency levels up: 1) borrowers who are coming off of their fixed interest mortgage rate period and experiencing payment shock and 2) the lack of refinancing options.

According to the report, weighted-average delinquencies were subject to their biggest increase since 4Q04. "

The weighted-average delinquency trend during Q1 2008 for the U.K. nonconforming RMBS sector increased to 8.8%, from 7.7% in 4Q07," said Georgij Ludmirskij, a Moody's senior associate and co-author of the report. "This compares with 8.1% in 2005, 9.0% in 2006 and 7.2% in 2007. Vintage 2007 has shown the steepest increase in repossessions in its first year after closing. "

At the same stage of seasoning, the repossessions in the  2005 and 2006 vintages stayed below 0.50% and for all other vintages, below 0.30%," Ludmirskij added. Some transactions recorded up to 2.5% of repossessions in their first year after closing.

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