Moody's Investors Service sees hope in the UK residential mortgage-backed securities (RMBS) market as low interest rates fuel fewer possessions. The news of low rates and possessions "bodes well" for the market, according to commentary out of Moody's Structured Finance. Moody's analyst Anthony Parry and economist Nitesh Shah point out in the research note that Q209 UK possession figures showed an unexpected 10% drop from the previous quarter. The figures, reported by the UK Council of Mortgage Lenders (CML), indicated the low interest rate environment as a catalyst for low possessions. Moody's also noted the Bank of England in its latest quarterly inflation report "strongly suggested" interest rates would remain at historic lows for longer than expected. But the commentary also warned against banking on continued low rates. "In this environment of heightened uncertainty, where the impact of monetary loosening is not well understood, there is a risk that interest rates could increase suddenly," said Parry and Shah. "A small increase in interest rates might have a detrimental impact on the levels of possessions." The CML on Friday noted a combination of factors helped keep mortgage arrears and possessions in check during Q209 despite the recession, indicating a combination of factors may be necessary to keep possessions low in the long-term. "Most importantly, lenders are showing forbearance to borrowers where customers are trying to resolve their payment problems and have a realistic chance of doing so," the CML said. "Low interest rates are helping ensure that arrears grow less quickly, giving borrowers a better chance of getting back on track and lenders more scope to extend forbearance. And government schemes are providing some help for borrowers in difficulty by promoting early communication between borrowers, lenders and debt advisers." Write to Diana Golobay.