Moody's Investors Service said that the U.K. nonconforming RMBS market is severely affected by the U.K. recession.
Both macro-economic and RMBS market specific performance indicators are showing exceptionally weak levels. GDP fell by 1.5% quarter-over-quarter in 4Q08 and the unemployment has increased to 6.3%.
"As the economy contracts, more jobs are expected to be removed from the market," says Nitesh Shah, a Moody's economist. "Personal insolvencies have risen sharply and we also expect to see an increase in personal insolvency filings over 2009."
In the fourth quarter, the rating agency downgraded 61 classes of notes in ten different transactions in the U.K. nonconforming market.
All downgraded transactions showed weaker-than-expected performance. Exposure to unhedged interest and currency risks as well as other operational risks also prompted certain transaction downgrades in 4Q08.