OREANDA-NEWS. Fitch Ratings says in a new report released today that the prepayment rates of the underlying loans backing Japanese apartment loan CMBS remain high and may lead to concentration risk in the loan pools. However, such risk is likely to be mitigated by various factors, including sufficient credit enhancement.

The high prepayment rates are most likely driven by refinancing. The outstanding balance of bank loans extended to individuals who manage rental-housing businesses has steadily risen. This trend is supported by both the increase in loans for newly built apartment houses and the refinancing of loans originally extended by non-banks, including securitised loan lenders. The interest rates for refinancing are lower than previously due to the downward trend in interest rates and shifts from non-bank to bank lenders.

The report is part of Fitch's "APAC SF Chart of the Month" series, which highlights topical issues in the region and can be found at www.fitchratings.com.