Together prices £528 million mortgage-backed securitisation
#Together #mortgage-backed securitisation #£528 million #pricing #capital raising #financial markets #risk management
📌 Key Takeaways
- Together has priced a £528 million mortgage-backed securitisation deal.
- The securitisation involves pooling mortgages to create tradable securities.
- This move aims to raise capital and manage risk for the lender.
- The pricing reflects current market conditions and investor demand for such assets.
🏷️ Themes
Finance, Securitisation
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Deep Analysis
Why It Matters
This securitisation matters because it demonstrates continued investor confidence in the UK specialist lending market despite economic headwinds, providing Together with substantial capital to fund future lending. It affects borrowers seeking specialist mortgages who may benefit from increased lending capacity, investors seeking asset-backed returns, and the broader UK housing finance ecosystem. The transaction's success signals market resilience and could influence pricing and availability in the non-conforming mortgage segment.
Context & Background
- Together Financial Services is a UK specialist lender focusing on complex mortgages, buy-to-let, and commercial loans often underserved by mainstream banks
- Mortgage-backed securitisation (MBS) involves pooling mortgages and selling bonds backed by their cash flows, a common funding method for lenders since the 1980s
- The UK specialist lending market has grown significantly post-2008 as traditional banks retreated from higher-risk segments
- Together completed a £486 million securitisation in 2023, making this £528 million deal a notable increase in scale
- Regulatory capital requirements under Basel III make securitisation attractive for lenders to manage balance sheet constraints
What Happens Next
Together will deploy the raised capital to originate new specialist mortgages over the coming quarters, potentially announcing increased lending targets. The bonds will begin trading, with performance data on delinquency rates and prepayments monitored by investors quarterly. Regulatory filings will detail the portfolio composition, and market analysts will watch for similar securitisations from competitors like Shawbrook or OakNorth in the next 6-12 months.
Frequently Asked Questions
Mortgage-backed securitisation packages pools of mortgages into tradable bonds sold to investors. Lenders use it to raise capital, transfer risk, and fund new lending while managing regulatory capital requirements more efficiently than holding loans on their balance sheets.
This increases available funding for specialist mortgages, potentially improving access for self-employed borrowers, those with complex incomes, or property investors. However, pricing depends on broader market conditions and the specific risk profile of each borrower.
Primary risks include borrower defaults affecting bond payments, interest rate changes impacting mortgage affordability, and property value declines reducing collateral quality. Investors bear these risks in exchange for potentially higher returns than government bonds.
Post-crisis securitisations feature stricter underwriting, transparency requirements, and risk retention rules where issuers must keep 5% of the risk. Together's deal likely involves more conservative loan-to-value ratios and thorough due diligence than pre-crisis equivalents.
Institutional investors like pension funds, insurance companies, and asset managers seeking diversified fixed-income exposure. Some tranches may attract different investors based on risk ratings, from AAA-rated senior bonds to higher-yielding subordinate pieces.