A measure of loan delinquencies in bonds backed by US commercial mortgages rose by the most since July 2011 last month, according to Fitch Ratings.
Loan delinquencies within an index maintained by the ratings agency moved 22 basis points higher to 3.72 per cent in June from 3.5 per cent in May, as $1.24bn of underlying debt turned sour.
Fitch noted that most of the new delinquencies stemmed from maturity defaults, meaning bonds had not been paid off within their expected maturity but may still recoup losses through slower repayment.
Despite the rise, US CMBS delinquencies still remain below Fitch’s earlier mid-2017 estimate of between 5.25 per cent and 5.75 per cent. Office and retail commercial mortgages currently have the highest delinquency rate at 6.23 per cent.
“The primary reasons are strong repayment activity of maturing loans during the first six months of the year, many of which were previously identified as highly leveraged and would face difficulty refinancing,” said Fitch. “The remainder of the year looks promising … as a result, Fitch is lowering its year-end forecast to between 4.25% and 4.50%.”