European RMBS 2024 Outlook

This commentary details our expectations for residential mortgage performance and our residential mortgage-backed securities (RMBS) ratings outlook for Europe in 2024. The report contains dedicated sections on the six main RMBS markets we cover: the United Kingdom, Ireland, the Netherlands, Italy, Spain, and France.

Mortgage borrowers in Europe coped well with the rapidly rising central bank and mortgage interest rates during 2023. While mortgage performance has seen some deterioration, arrears levels remain low in absolute terms as mortgage costs have remained unchanged for many borrowers that entered fixed-rate contracts before 2023. However, even if rates remain stable, further pressure on arrears for 2024 is expected as the fixed-rate periods end and borrowers refinance at higher rates.

The outlook for credit ratings remains stable across the board for European RMBS transactions. RMBS deals are structured with sufficient credit protection to factor in the asset performance deterioration that we are likely to see in 2024.

The total RMBS issuance was EUR 135.2 billion in 2023 compared with EUR 109.1 billion in 2022, with RMBS contributing to about 58.2% of the total European Structured Finance issuance in 2023. For 2024, we expect strong issuance to continue, especially in UK prime RMBS. The reduction in central bank funding is expected to keep boosting market issuance.