According to the Fitch Ratings U.K. Non-Conforming Index, U.K. non-conforming RMBS deals showed a slight improvement in 2Q06. But analysts said that these improvements in arrears levels need to be considered in the context of the rise in sold repossessions, which have lead to exits from the portfolio that would have otherwise still remain part of these arrears figures.

"Stronger house price performance in the London area in recent months may have resulted in the rise in repossessions as lenders take advantage of the better recovery prospects in the more buoyant market," said Andy Brewer, a senior director at Fitch.

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