Borrowers with patchy credit ratings have increased, with more falling behind on their mortgages and fewer able to refinance their higher interest rate loans, according to a report by credit rating agency Standard & Poor’s.

The report showed that the total delinquency rate for mortgages rose to a record 23.31% of the total pool in Q2 2008 which is up from 22.17% at the end of Q1 2008. Seriously delinquent loans (those overdue by over three months) rose to 12.12% of the total. Roughly 70-80% of all subprime mortgages have been packaged into securities and their performance shows how those loans, never tested through an economic downturn, will behave.

The report also highlighted, amongst other things, differences among the performance of lenders as, for example, loans generated by the Bank of Scotland showed noticeably higher arrears. It also showed the securitisation market had a relatively high number of self-certified loans (where borrowers provided no proof of income) within it. But Northern Rock loans showed the sharpest deterioration even after taking account of the high number of borrowers refinancing with other lenders.