Overview
- Following our review of Elvet Mortgages 2020-1 PLC, we affirmed our ratings on the class A, B-Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd notes.
- The transaction has experienced particularly high prepayments in recent months and the pool balance has reduced by about 64% since closing in July 2020.
- The transaction is backed by a pool of owner-occupied mortgage loans secured on properties in England and Wales.
LONDON (S&P Global Ratings) Jan. 31, 2023--S&P Global Ratings today affirmed all of its credit ratings on Elvet Mortgages 2020-1 PLC's notes. We affirmed our 'AAA (sf)' rating on the class A notes, 'AA+ (sf)' rating on the class B-Dfrd notes, 'A (sf)' rating on the class C-Dfrd notes, 'BBB+ (sf)' rating on the class D-Dfrd notes, and 'BBB- (sf)' rating on the class E-Dfrd notes.
Today's affirmations reflect the transaction's consistent stable credit performance so far and the significant paydown of the class A notes since closing in July 2020. The transaction has been amortizing sequentially since closing and this has increased credit enhancement for the outstanding notes, most notably for the senior and mezzanine notes.
The transaction has a low level of arrears (0.2%). Total arrears are below the latest reading on our U.K. prime index where arrears are at 1.0% (see "European RMBS Index Report Q3 2022," published on Nov. 7, 2022).
Since closing, our weighted-average foreclosure frequency (WAFF) assumptions have increased at all rating levels. The pool's weighted-average original loan-to-value (LTV) ratio has increased by 10.3% since closing. The increase in the weighted-average original LTV ratio has a negative effect on our WAFF assumptions as the LTV ratio applied is calculated with a weighting of 80% of the original LTV ratio and 20% of the current LTV ratio. Additionally, the exposure to first-time buyers has increased by 19.5% since closing, which increases our WAFF assumption. This change in collateral profile is driven by the prepayment of loans within the transaction.
The 3.6% reduction in the weighted-average current LTV ratio since closing and the 7.7% reduction in loans attracting our jumbo valuation adjustment has led to a reduction in our weighted-average loss severity (WALS) assumptions.
Credit Analysis Results | |||
---|---|---|---|
Rating level | WAFF (%) | WALS (%) | Credit coverage (%) |
AAA | 24.21 | 36.25 | 8.78 |
AA | 16.38 | 29.50 | 4.83 |
A | 12.36 | 18.89 | 2.34 |
BBB | 8.54 | 12.92 | 1.10 |
BB | 4.53 | 8.87 | 0.40 |
B | 3.62 | 5.54 | 0.20 |
There are no counterparty constraints on the ratings on the notes in this transaction.
Our credit and cash flow results indicate that the available credit enhancement for the class A, B-Dfrd, C-Dfrd and D-Dfrd continues to be commensurate with the assigned ratings. For the E-Dfrd notes, given the high recent prepayment rates, we do see some deterioration in one low prepayment scenario but, given the overall transaction performance, we believe the current rating remains appropriate. We have therefore affirmed our ratings on all classes of notes.
Macroeconomic forecasts and forward-looking analysis
We think U.K. inflation will peak at 12% within months and remain elevated during the first half of 2023, averaging 7%. Although high inflation is overall credit negative for all borrowers, inevitably some borrowers will be more negatively affected than others and to the extent inflationary pressures materialize more quickly or more severely than currently expected, risks may emerge. Borrowers in this transaction are largely paying a fixed rate of interest on average until 2024. As a result, in the short term, borrowers are protected from rate rises but will feel the effect of rising cost of living pressures.
Elvet Mortgages 2020-1 PLC is a static RMBS transaction that securitizes a portfolio of owner-occupied mortgage loans secured on properties in England and Wales.
Related Criteria
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct. 18, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- General Criteria: Methodology Applied To Bank Branch-Supported Transactions, Oct. 14, 2013
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009
Related Research
- Economic Research: European Housing Prices: A Sticky, Gradual Decline, Jan. 11, 2023
- EMEA Structured Finance Chart Book: December 2022, Dec. 8, 2022
- Credit Conditions Europe Q1 2023: Time To Face The Music, Dec. 1, 2022
- Economic Outlook U.K. Q1 2023: A Moderate Yet Painful Recession, Nov. 29, 2022
- European RMBS Index Report Q3 2022, Nov. 7, 2022
- Russia-Ukraine Military Conflict: Key Takeaways From Our Articles, July 7, 2022
- Cost Of Living Crisis: Mapping Exposures In European RMBS And Covered Bond Markets, June 27, 2022
- European RMBS Market Update Q1 2022: Challenges And Opportunities From Rising Interest Rates, June 1, 2022
- Cost Of Living Crisis: How Bad Could It Get For U.K. RMBS?, May 20, 2022
- Global Macro Update: Growth Forecasts Lowered On Longer Russia-Ukraine Conflict And Rising Inflation, May 17, 2022
- Residential Mortgage Market Outlooks Maintained For 15 European Jurisdictions Following Revised Economic Forecasts, April 28, 2022
- Asset Price Risks: Inflated Property Values Mean Higher Loss Assumptions In European RMBS And Covered Bonds, March 21, 2022
- ESG Industry Report Card: Residential Mortgage-Backed Securities, March 31, 2021
- 2017 EMEA RMBS Scenario And Sensitivity Analysis, July 6, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
Primary Credit Analyst: | Josh Timmons, London (44) 20-7176-0831; josh.timmons@spglobal.com |
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