Mortgage lenders are structurally stronger than they were 10 years ago, and most should remain robust even if conditions within the housing market become more difficult over the medium term, according to a new report by Moody’s Investors Service.
The multinational ratings agency made the claim as part of its Banking System Outlook for next year.
It noted that although house price increases have mirrored those that existed before the last market crash, it is not expected there will be a serious increase in delinquencies in residential mortgages in a downturn.
However, in the report it upgraded the outlook afforded to Nationwide, but changed the outlook for Norwich & Peterborough to negative as it warned that: ‘It is our belief that individual institutions will have the ability to become stronger, despite more challenging overall market conditions¦but particular lenders may be more vulnerable than others to a change in market conditions.’
Matthew Bulloch, group chief executive at Norwich & Peterborough, said they supplied more detailed information after the initial review, but was disappointed it did not appear to have been taken into account.
Nevertheless, Bulloch said: ‘In the areas in which Moody’s expressed concern we are actually more conservative than the rest of the market. Our average LTV is 40% whereas the Council of Mortgage Lenders’ average is 60%. We hope this is taken into account at the next review.’
The overall outlook for smaller lenders, especially building societies, was positive as it noted that changes were being made to diversify sources of income and improve general efficiency.