UK securitisation market branded 'flat'

UK securitisation market branded 'flat'




Financial uncertainty in the wake of Brexit could slow demand for securitisation.

Richard Pike, sales and marketing director of lending and savings software provider Phoebus Software, was responding to claims that increasing pressures following Brexit could see banks attempt to cut costs by selling-off mortgage portfolios

“Generally, wholesale market trades have come to a near halt, led by uncertainty both in the build up to Brexit and in its aftermath,” Richard insisted.

“This has led to a lack of confidence and investors unwilling to invest in mortgage-backed securities due to a poor rate of returns, as well as in some instances [private equity] funds actually halting the launch of new lenders until more clarity is obtained about future market performance.

“The UK securitisation market is at best flat and it does not look like this situation is going to change for some time to come.”

However, Benson Hersch, chief executive of the Association of Short Term Lenders, argued that recent cuts to interest rates could see an increase in securitisation as firms attempt to reduce costs.

“The issue isn’t Brexit, but the likelihood of very low interest rates for some time,” Benson explained.

“Some banks are finding it difficult to make sufficient profits in this environment.

“Securitisation, if this carries a return which reflects the risk, could well be an attractive proposition.”

However, Benson admitted that demand for securitisation would vary depending on the firm.

“As ever, perception is everything and much will depend on how comfortable investors are with the risk levels, especially property prices, LTVs and underwriting standards.”

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