Market updates and sector developments

The UK buy-to-let mortgage market is likely to see an increase in arrears, a reduction in origination volumes and higher rates of home repossessions in the months ahead. Analysis of RMBS portfolios by DBRS Morningstar highlighted headwinds in the form of tenant affordability, stricter regulations and changes in taxation that are likely to put pressure on BTL landlords.

The analysis finds that 17% of BTL loans from a sample of 72,000 are due to undergo resetting by the end of 2024. DBRS Mornningstar says borrowers impacted are likely to face an average increase of 52% in their monthly mortgage payments.

Recent rises in rates have meant mortgage costs are outstripping rental yields in many places. A report from Savills forecasts that BTL profits, net of tax, will fall to 3.9% in the second quarter of 2023, compared with 25.7% five years ago.

In other news…

Santander project finance CLO given triple-A(SF) rating for senior notes

Charlotte 2023 Funding, a £704.9m project finance CLO originated by Banco Santander, has secured a triple-A(SF) rating for its senior notes from Scope Ratings. The overall revolving cash securitisation consists of £482.8m in senior notes and £222.1m in non-rated class B notes.

All 48 loans in the deal are denominated in sterling and based in the UK, with the class A notes benefiting from a 31.5% credit enhancement provided by subordination, Scope says. Around 74% of the portfolio is operational assets, with 36.4% in the private finance initiative sector, 29.6% in infrastructure, 21.2% in renewables and 12.8% in utilities.

European fintechs attract US VCs

European securitisation-focused fintech platforms GenTwo and Tradeteq have raised US$15m and US$12.5m respectively from US venture capital firms. The fresh capital will enable the businesses to pursue international expansion. 

MS&AD Ventures led the series-A round for London-based Tradeteq, which helps lenders securitise and distribute trade finance assets. Interlock Partners also took part in the deal, following which Tradeteq will look to expand into the US market. 

The series-A round for Zurich-headquartered GenTwo was led by Point72 Ventures. The startup, which says it specialises in securitising assets that are both bankable and non-bankable — such as fine art — did not reveal specific details of its international expansion plans.