UK RMBS—Lending with a Social Aspect?

This commentary looks at the recent introduction of a 100% loan-to-value (LTV) mortgage product in the UK market. It considers other similar products in the market while discussing the risks involved and potential environmental, social, and governance (ESG) considerations, particularly surrounding Social factors.

Key highlights include:
-- An introduction to 100% LTV mortgages in the UK – both pre-global financial crisis and current products.
-- A look at how the lending of particular 100% LTV products in the UK mortgage market is approached and the risks involved.
-- Whether 100% LTV mortgages could be considered a social factor when it comes to assessing ESG.

“In our perspective, we may consider this type of mortgage product to be a social factor because the product promotes homeownership and Skipton appears to be lending prudently. Generally, the 100% LTV loans are considered credit negative; however, the comparable interest rate on Skipton's five-year fixed-rate product with other lenders in the 100% LTV area could be viewed positively as it increases affordability”, said Simon Murphy, Vice President of European Operational Risk at DBRS Morningstar.