Only four out of 17 Standard and Poor’s (S&P) rated mortgage funds have active ratings, nearly four months after being placed ‘on hold’ after the Government bank guarantee led to a spike in redemptions and a redemptions freeze in the mortgage sector, according to S&P’s review of mortgage funds.
Only three mortgage funds have been able to maintain their original redemption provisions. S&P has applied ratings to those funds and has resolved one ‘on-hold’ rating after the manager said a permanent product structure change had been introduced to offer limited redemptions on an ongoing basis.
The continuing freeze comes at a time when there is an increased likelihood for outperformance relative to benchmark in the mortgage sector, according to Peter Ward, a fund services analyst at S&P.
Ward said while the Investment and Financial Services Association was working with fund managers to find a solution to the redemptions freeze, there was no quick fix.
“This situation has come at a time when competition for mortgages has dissipated and higher lending margins and better loan terms, including lower gearing, are available,” Ward said.
