A clutch of UK building societies have had their credit ratings downgraded by Moody’s.
The Nationwide saw its financial strength rating reduced from B to C-; Chelsea Building Society has been downgraded from C to E+; West Bromwich saw its rating cut from C- to E+.
Moody’s holds the view that the global financial crisis will lead to higher credit losses than previously anticipated.
In this respect the ratings agency predicts that specialist loan sectors, such as buy-to-let and self-cert will come under pressure.
However, the reassessments assume the UK housing market will see a 40% peak-to-trough fall.
Chelsea Building Society has accused Moody’s of a “knee jerk reaction” and has challenged the firm’s credentials, pointing out that it failed to foresee the credit crisis.
The Society says it is a £14 billion organisation with £4.5 billion in liquid assets and points out that it has passed stress tests introduced recently by the Financial Services Authority.
The Building Societies Association comments that the downgrades are based on “a very pessimistic house price scenario” and has told savers they should not be worried.
Other societies downgraded include Coventry, Newcastle, Norwich & Peterborough, Principality, Skipton, Yorkshire and Britannia, which is in the process of merging with Co-operative Financial Services.
In addition the “ratings outlook” for Leeds and Nottingham building societies have been amended to “negative” indicating a possible rating cut in the future.