UK non-conforming RMBS could withstand rate rise despite BoE warning

By Tom Porter
03 Apr 2014

Investors who have moved into non-conforming UK RMBS paper to improve their returns in the last 18 months should not suffer from poor performance due to increased interest rates, according to Moody’s — despite a warning from the Bank of England (BOE) to take an impending rate rise more seriously.

“Our model predicts that a cumulative interest rate increase of 1.0%, which we do not expect until Q1 2016, will only lead to an 0.9% increase among those borrowers not already in arrears, experiencing negative monthly cash flows after mortgage servicing and living expenses have been taken into ...

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