This report does not constitute a rating action.
DUBLIN (S&P Global Ratings) April 15, 2025--A report published today by S&P Global Ratings titled “Explaining Irish RMBS Diverging Performance,” compares prime and reperforming loan (RPL) collateral performance trends.
Key Takeaways
- Total arrears in Irish RPL RMBS increased to 25.7% in December 2024 from 8.4% in January 2022, whereas prime arrears increased to 1.1% from 0.8% within the same period. The weighted-average one-month conditional prepayment rate in Irish RPL RMBS increased to 6.0% from 4.7% over the same period, while prime CPR levels also increased to 14.9% from 6.9%.
- Within a sample of prime RMBS that we rate, 44% of borrowers refinance their mortgage before the end of their fixed rate term, while another 24% are granted a product switch to re-fix with their existing lender. For remaining borrowers, their loan rolls onto a variable rate product. Refinancing activity has increased prepayments in prime RMBS and accelerated deleveraging of their pools. RPL RMBS mainly comprise more seasoned collateral originated pre-2008, with most borrowers on variable rate mortgages.
- There appears to be no material difference in prime RMBS arrears, regardless of whether borrowers take a product switch or not. Our analysis shows 1.3% of loans which exited a fixed-rate mortgage are in arrears, compared with 1.1% that did not.
This diverging performance reflects the difference in collateral quality between prime and RPL transactions. If rates continue declining and unemployment remains low, we expect arrears in RPL transactions to decline. Prime RMBS arrears are likely to remain low. Also, in prime transactions, we envisage the mortgage switching market to remain competitive as lenders look to retain borrowers and sustain the market share. Rising house prices may support high prepayments, especially from borrowers in the buy-to-let space or those who were previously in negative equity on their property.
The report is available to RatingsDirect subscribers at www.capitaliq.com. If you are not a subscriber, you may purchase a copy of the report by emailing research_request@spglobal.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box at www.spglobal.com/ratings. Alternatively, call S&P Global Ratings’ Global Client Support Line (44) 20-7176-7176.
Primary Contact: | Philip Bane, Dublin 353-1-568-0623; philip.bane@spglobal.com |
Secondary Contacts: | Stephen Kemmy, Dublin 353-1-568-0604; stephen.kemmy@spglobal.com |
Alastair Bigley, London 44-20-7176-3245; Alastair.Bigley@spglobal.com |
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