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Elvet Mortgages 2020-1 PLC RMBS Ratings Affirmed On Five Classes Of Notes


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Elvet Mortgages 2020-1 PLC RMBS Ratings Affirmed On Five Classes Of Notes


  • 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.

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Primary Credit Analyst:Josh Timmons, London (44) 20-7176-0831;

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