...Stable Early Stage Arrears: The one- to two- months arrears bucket remained broadly stable at 1.5% in 1Q14. This reflects the stabilisation of the macroeconomic environment and improving employment prospects. Increasing Stock of Defaulted Loans: The slowdown in early stage arrears is offset by the increased volume of loans rolling into default and the slow pace of property sales. The balance of defaulted loans increased to 4.1% of the current pool balance in 1Q14. Originator Intervention: Certain originators continue to manage transactions arrears exposures by refinancing distressed borrowers. This is evident in reported prepayment rates up to three times higher than the sector average. Home Prices: After slight quarterly growth in 3Q13 (0.7%), the change in house prices turned negative again in 4Q13 (-1.3%). Fitch expects house prices to continue their gradual decline until 2015, bottoming out at 40% below peak values....
