It will be the first deal of this kind struck by the majority State-owned lender since the onset of the credit crisis in 2007.

Prior to the crisis, the majority of mortgage lenders raised substantial amounts of capital via the securitisation markets, issuing securities backed by mortgages to investors who then received the mortgage repayments as an income stream.

The global securitisation markets closed down almost overnight in 2007 when so-called ‘toxic’ mortgages in the US came to light – billions of dollars worth of sub-prime loans which had been granted to borrowers with no means of repaying them.

UK mortgages which backed UK securitisations were never such poor quality and did not suffer anywhere near the same level of default. However, the entire global market was tainted by the US sub-prime experience.

However, investor appetite for residential-mortgage backed assets has improved quietly in the last 12 months, and a number of UK banks have carried out successful securitisation deals.

Sponsored

Grasping the next buy to let opportunities

Sponsored by Aldermore

This latest is the first time RBS will have attempted a securitisation since 2007.

Securitisation is an important means of banks raising funding to offer back into the market in terms of more loans and mortgages, and the reopening of these markets is widely regarded as a necessary step in helping the longer-term UK recovery.

In the absence of securitisation, banks and building societies have to rely on raising funds via customer savings and special funding schemes supplied by the government. These schemes run out very soon, with the government insisting that banks start repaying the money they have borrowed from one (the Special Liquidity Scheme – SLS) in January 2011.

The RBS deal is will be regarded as a bellwether for the wider European market thanks to its size and the fact that it is the first the bank will have issued in three years. Prior to the credit crisis, UK banks accounted for m ore than 50% of all the residential-mortgage-backed securitisation activity in Europe.

RBS is eager for the securitisation to be successful, as – like other UK banks – it needs more funds to lend out to businesses and households if it is to meet its lending targets for the year.