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Securitisation market will ‘continue to hold its own’ – Pike

by: Richard Pike, chief sales and marketing officer, Phoebus Software
  • 04/06/2024
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Securitisation market will ‘continue to hold its own’ – Pike
I arrive at the Global ABS conference in Barcelona, which focuses on structured finance and securitisation, in what feels like a pretty buoyant UK securitisation market.

There have been plenty of specialist lenders getting notable securitisation transactions off the ground, with two of the more notable recently being Keystone’s £560m transaction and Molo and ColCap UK’s £300m debut.

When you compare the volume and financial amounts of transactions now to those in the 1990s and 2000s, we are still way short of those days, but in such a highly regulated environment following the global financial crisis, it’s not overly surprising.

The good news is that the regulators of both the UK and Europe seem to appreciate the strides the industry has made in tightening the risk belt and, very positively, are saying wholesale funding should be part of a healthy mortgage market.

Around 3,000 originators, servicers, mortgage lenders, banks, lawyers and other firms involved in securitisation and funding are here on what is the first day of the conference.

From my perspective, I’ll be meeting with as many people and entities involved in transactions as possible. I want to ensure the out-of-the-box securitisation capability within the Phoebus servicing product remains fit for purpose.

I’ve been attending this conference on and off for probably twenty years now, and in that time, the basic principles of the residential mortgage-backed securities (RMBS) market haven’t really changed.

I’m hoping to hear some innovation around the process but – although expensive and with identifiable cost savings clear to all – there’s a big movement of “if it ain’t broke, don’t fix it” in the asset-backed securities (ABS) market. There is something to be said for that when it is a successful model, as it stands.

 

Election creates question around interest rates

Running up to the election, macroeconomic factors indicate interest rates will be lower by the end of the year, with employment remaining stable, GDP increasing and inflation reducing. So, a great backdrop for securitisation transactions to remain at a healthy level.

Will the upcoming election have an effect? You’d hope that the potential for a change in government is already factored into most economic predictions. But, with the likely new government promising to spend money that the country has no budget for, and commitments from all sides that no taxes will be increased over the next term, this does potentially create a question around interest rates and what level they will drop to moving forward.

So, it is an interesting time for discussions this week. I was here shortly after Brexit happened and, although no-one could believe the decision, the market has continued to function, and in reality it will continue to do so, no matter what happens in the UK general election on 4 July.

We should all expect the securitisation market to continue to hold its own.

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