The market for bonds backed by residential mortgages has experienced very strong issuance in the first few months of the year, but the macro-economic backdrop and interest rate uncertainty pose a threat to performance, according to Fitch, the ratings agency.

Stuart Jennings, managing director of Fitch, said arrears were on the rise in the UK in particular, which had led to some deals drawing on the back-up funds that are built into mortgage backed securities to cover interest payments to investors when cash flows suffer.