Fitch affirms 4 UK Prime RMBS
Global rating agency Fitch has affirmed four UK prime RMBS transactions: Brass No.1 Plc (Brass 1), Brass No.2 Plc (Brass 2), Brunel Residential Mortgages Securitisation No.1 plc (Brunel 1) and Friary No.1 plc (Friary 1). A full list of rating actions is below.
The underlying mortgages in Brass 1 and Brass 2 were originated by Accord Mortgages Limited, a wholly owned subsidiary of Yorkshire Building Society ('BBB+'/Stable/'F2'). Brunel 1 is backed by mortgages originated by Bristol & West, which is a subsidiary of Bank of Ireland (BOI, 'BBB'/Stable/'F2') whilst Friary 1 is collateralised by mortgages originated by Principality Building Society.
The volume of loans in arrears by three months or more has remained relatively low in Brass 1, Brunel and Friary; standing at 0.3%, 1.5% and 0.5% of their respective current pool balances. Only one interest payment date has passed since Brass 2 closed in October 2012 and no loans have been reported as being in three-months plus arrears or defaulted.
Additionally, limited numbers of loans have been taken into possession, with 0%, 0.3% and 1% of the initial collateral balances reported for Brass 1, Friary and Brunel. Given the low pipeline of loans in late stage arrears, as well as the current stock of unsold possessions in all four transactions, Fitch expects the levels of defaults and subsequent losses associated with the sale of properties in possession to remain limited, if any, in the near future.
Friary 1, Brass 1 and Brass 2 are currently paying down sequentially with no pro-rata mechanism available within the structure. Friary 1, Brunel 1 and Brass 1 also include fully funded reserve funds that are not permitted to amortise. Both features will contribute towards the steady build-up in credit support available in all three transactions.
Fitch believes that borrower affordability continues to be supported by the prevailing environment of low interest rates. Hence, even a modest rise in interest rates, expected to take place at the start of 2014, will likely trigger an increase in arrears and subsequent defaults.
The anticipated margin rise in Bristol and West's tracker products, predominantly on its buy-to-let (BTL) mortgages to 4.49% on 1 May, will potentially affect borrowers in the Brunel transaction, presently comprising 57.6% of BTL trackers.