articles Ratings /ratings/en/research/articles/241107-u-k-second-lien-monitor-q3-2024-13274288 content esgSubNav
In This List
COMMENTS

U.K. Second-Lien Monitor Q3 2024

Take Notes - The Rise Of U.S. CLO ETFs

Covered Bonds Uncovered

COMMENTS

2025 U.S. Residential Mortgage And Housing Outlook

COMMENTS

Weekly European CLO Update


U.K. Second-Lien Monitor Q3 2024

image

Table 1

Second-lien--Key features
Q3 2024
Number of loans 38,765
Total current balance (£) 1,793,456,128
Average original balance (£) 54,000
Average current balance (£) 46,265
Owner-occupied (% of total current balance) 90.9
Owner-occupied 90+ delinquencies (% of current balance) 3.1
Owner-occupied WA original loan term (months) 177
Buy-to-let (% of total current balance) 9.1
Buy-to-let 90+ delinquencies (% of total current balance) 2.9
Buy-to-let WA original loan term (months) 153
WA interest rate margin (% of total current balance) 7.8
Interest rate reversion margin (% of total current balance)
<=4 8.2
4-5 17.2
5-6 15.2
6-7 12.2
7-8 6.4
8-9 3.8
9-10 4.2
>10 33.0
WA average borrower's joint income (owner-occupied) (£) 53,894
WA--Weighted-average. Q--Quarter.

Table 2

Second-lien original loan-to-value ratios (%) and loan status (months in arrears)
<40 40-50 50-60 60-70 70-80 80-90 90-100 >100
Current 95.2 96.0 93.7 93.8 93.3 93.1 90.0 85.3
1-2 2.1 1.2 2.9 2.4 2.4 1.7 1.5 2.3
2-3 0.5 1.1 0.6 1.1 1.1 0.7 1.4 1.1
3-4 0.4 0.3 1.2 0.8 0.9 0.5 0.4 0.7
4-5 0.3 0.4 0.2 0.4 0.5 0.7 0.4 0.5
5-6 0.2 0.2 0.2 0.3 0.3 0.5 0.5 0.1
>6 1.2 0.9 1.1 1.2 1.5 2.9 5.7 10.0
As of Q3 2024.

Table 3

Total delinquencies
(%) Q2 2024
EMEA RMBS index 3.9
U.K. second-lien* 6.2
U.K. prime 0.8
U.K. BTL post-2014 2.4
U.K. nonconforming post-2014 9.2
*Based on loan-by-loan data as of Q3 2024. Q--Quarter. BTL--Buy-to-let. Source: S&P Global Ratings' European RMBS Index Report Q2 2024.

Table 4

Breakdown of second-lien total delinquencies Q3 2024
Current balance (%) Number of loans
Current 93.8 36,585
1-2 2.2 717
2-3 0.9 298
3-4 0.8 199
4-5 0.4 150
5-6 0.3 111
>6 1.6 707
Q--Quarter.

Chart 1

image

Chart 2

image

Chart 3

image

Chart 4

image

Chart 5

image

Chart 6

image

Chart 7

image

Chart 8

image

Table 5

Ratings activity in second-lien transactions
Closing date Surveillance analyst

Castell 2019-1 PLC

Sept. 19, 2019 Redeemed

Castell 2020-1 PLC

Sept. 30, 2019 Redeemed

Castell 2021-1 PLC

Oct. 21, 2021 Michael Dillon

Castell 2022-1 PLC

July 19, 2022 Michael Dillon

Castell 2023-1 PLC

April 25, 2023 Michael Dillon

Castell 2023-2 PLC

Nov. 15, 2023 Michael Dillon

Elstree Funding No.2 PLC

Jan. 29, 2022 Pratish Dcruz

Elstree Funding No.3 PLC

March 22, 2023 Pratish Dcruz

Elstree Funding No.4 PLC

Feb. 22, 2024 Pratish Dcruz

Polo Funding 2021-1 PLC

Oct. 21, 2021 Arnaud Checconi

Together Asset Backed Securitisation 2021-CRE1 PLC

March 15, 2021 Aarondeep Hothi

Together Asset Backed Securitisation 2021-CRE2 PLC

June 30, 2021 Aarondeep Hothi

Together Asset Backed Securitisation 2022-2ND1 PLC

May 27, 2022 Aarondeep Hothi

Together Asset Backed Securitisation 2022-CRE1 PLC

June 13, 2022 Aarondeep Hothi

Together Asset Backed Securitisation 2023-CRE-1 PLC

Nov. 28, 2023 Aarondeep Hothi

Together Asset Backed Securitisation 2024-2ND1 PLC

Jan. 19, 2024 Aarondeep Hothi

Fylde Funding 2024-1 PLC

Oct. 9, 2024 Vedant Thakur

Summary Of Methodology For Our U.K. Second-Lien Monitor

What is included in the index?

The index mostly includes second- or lower-lien loans of U.K. transactions that we rate. Charts 1, 2, 3, and 8 use investor report data from "pure" second-lien transactions.

What is the definition of total delinquencies?

Total delinquencies are arrears for one or more calendar months.

Is the index loan count- or dollar-weighted?

We calculate the index based on the current balance of each loan. For transaction-specific charts, we weight the figures against the transaction's current balance.

When a transaction redeems, how does it affect the index? Does it affect the previous quarter(s)?

When a transaction redeems, it does not affect the index beyond that point or the reported values for previous quarter(s).

When do we cut off the index for a given quarter?

The cut off is based on the period covered in investor reports. For example, if the index covers the period up to Q1 2023 for a quarterly reporting transaction, we include collateral data with a cut off only between Jan. 1, 2023, and March 31, 2023. For transactions that report monthly, we use the latest quarterly report.

Appendix

Transactions included in the monitor (loan-by-loan)
Transaction Weight (%)
Castell 2023-1 PLC 16.1
Castell 2023-2 PLC 14.9
Together Asset Backed Securitisation 2024-2ND1 PLC 14.5
Together Asset Backed Securitisation 2022-2ND1 PLC 10.7
Elstree Funding No.4 PLC 10.1
Castell 2022-1 PLC 9.7
Castell 2021-1 PLC 9.4
Elstree Funding No.3 PLC 4.8
Polo Funding 2021-1 PLC 4.7
Elstree Funding No.2 PLC 2.9
Together Asset Backed Securitisation 2022-CRE1 PLC 0.8
Together Asset Backed Securitisation 2021-CRE2 PLC 0.8
Together Asset Backed Securitisation 2023-CRE-1 PLC 0.5
Together Asset Backed Securitisation 2021-CRE1 PLC 0.2

Related Research

This report does not constitute a rating action.

Primary Credit Analyst:Alastair Bigley, London + 44 20 7176 3245;
Alastair.Bigley@spglobal.com
Secondary Contact:Feliciano P Pereira, CFA, Madrid +34 676 751 559;
feliciano.pereira@spglobal.com

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.

 

Create a free account to unlock the article.

Gain access to exclusive research, events and more.

Already have an account?    Sign in