INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith
Reed Smith 1 Blossom Yard
London E1 6RS Tel: +44 (0)20 3116 3000 Email: tbox@reedsmith.com/slcaldwell@reedsmith.com Web: www.reedsmith.com
Securitisation in 2025: A Year of Opportunities and Challenges Across Evolving Markets
ure. Much of this growth also stems from con - sumer loan securitisations, which benefited from early signs of rate stabilisation by the Federal Reserve and easing inflation. The non-agency residential mortgage-backed securities (RMBS) sector also exhibited resilience given investor confidence around stable US housing market fundamentals and low unemployment rates, despite concerns around affordability and high mortgage rates. The RMBS sector in the UK has experienced a similar resurgence, marking a turnaround from the previous year's volatility-driven constraints on issuance. Early 2024 saw spreads tightening and increased origination activity, supported by a more stable interest rate environment. Prime UK RMBS issuance reached approximately GBP15 billion in the first half of 2024, compared to GBP9.5 billion during the same period in 2023. This represents a 58% year-on-year increase. UK issuers have adapted their business mod - els to operate within the bounds of higher but steady rates, focusing on risk management to safeguard credit quality. Originations of fixed- rate mortgage products have grown, requiring careful hedging strategies to manage interest rate risks and overall being a shift that has ulti - mately strengthened the RMBS market’s appeal to investors.
As we look toward 2025, the securitisation mar - ket stands at a critical juncture marked by eco - nomic resilience, regulatory shifts and evolving investor expectations. Throughout 2024, secu - ritisation markets in most major economies, including the United States (US), United King - dom (UK) and Europe, as well as the likes of India and Australia, have shown remarkable adapta - bility amid fluctuating interest rates, inflationary pressures and a strong investor appetite across select asset classes. This introduction provides a snapshot of the securitisation trends shaping the industry, covering issuance volumes, delin - quency concerns and regulatory updates across a range of jurisdictions. Issuance Trends In 2024, the US remained the largest securitisa - tion market globally, with robust issuance across asset-backed securities (ABS) and mortgage- backed securities (MBS) despite the continu - ing volatile rate environment. The first quarter of 2024 saw a surge in ABS issuance, reaching USD85.6 billion, a substantial 30.5% increase from Q1 2023. By October 2024, the total issu - ance surpassed USD300 billion for the first time, with auto ABS comprising 49.8% of the total fig -
6
CHAMBERS.COM
Powered by FlippingBook