Moody’s, the ratings agency, yesterday gave warning that sub-prime mortgage-backed bonds created in the first half of 2007 were likely to default at record levels.

The average rate of serious loan delinquencies among sub-prime-backed securities created in 2006 has been higher this year than in the previous 12 months as borrowers with such loans have found it increasingly difficult to meet repayments in the slumping housing market, according to Moody’s.

But the rate of default on bonds backed by mortgages made this year, when the already weak lending criteria became even more lax, is likely to be higher still, Moody’s warned.

A serious delinquency is one in which the payments are 60 days or more past their due date and are increasing because declining house prices mean that borrowers can no longer remortgage their houses to meet their interest bills.

In the year to September 21, Moody’s cut ratings on 433 sub-prime-backed securities created last year, or 9.1 per cent of the total.

Moody’s added that, for bonds older than six months, 2006 was the worst year for serious delinquencies since at least 2000. Before this, sub-prime-backed securities formed only a tiny part of the fixed-income market.

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