The outlook for European Residential Mortgage-Backed Securities (RMBS) is more uncertain than in previous years for all European countries following the credit crunch, Fitch Ratings said in its '2008 Global Structured Finance Outlook' report published on Wednesday.

The outlook for European Residential Mortgage-Backed Securities (RMBS) is more uncertain than in previous years for all European countries following the credit crunch, Fitch Ratings said in its '2008 Global Structured Finance Outlook' report published on Wednesday.

'In the UK, house price inflation seems to be coming to the end of its long upward run as past interest rate rises and the influence of the credit crunch take effect,' said Stuart Jennings, head of RMBS EMEA at Fitch. Earlier transactions would have built up a large degree of equity protection through house price inflation, according to the Fitch report. But more recent deals, particularly those in 2007, will have minimal protection which may erode completely if house prices start to decline more rapidly.

Interest rates have continued to increase from late 2006 through early 2007, both in the UK and across the eurozone, putting pressure on borrower affordability. The Spanish mortgage market faces deteriorating performance due to affordability issues exacerbated by interest rate rises and a 97% variable rate market.

Ireland, which has experienced very strong house price appreciation over the past 10 years, is now seeing a decline in property prices. The agency notes that even if this downturn accelerates, this is unlikely to impact the 'outstanding' ratings for RMBS transactions in Ireland.