Market players have raised the red flag on U.K. nonconforming RMBS. Recent developments in the market - namely the summer credit crisis and teaser rates set to expire at the end of 2007 and beginning of 2008 - are some of the factors that have left the sector vulnerable to poor performance.

"We are expecting some pain in households as rates rise and, therefore, arrears," said a market observer at Fitch Ratings. "We have downgraded a few so far and expect more downgrades to come."

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