European ABS 2025 Outlook: Humming Along!

This commentary highlights our views on the key factors and risks likely to affect the performance of portfolios of consumer loans, revolving credit and credit cards, and auto loans and leases in Europe in 2025. We also highlight the impact of these trends on our existing credit ratings in these sectors for 2025.

In 2024, the European Central Bank and the Bank of England began to reduce policy interest rates as inflationary pressures started easing. Simultaneously, unemployment began to ease marginally in both the Euro area and the wider European Union, while it increased slightly in the UK.

Even as EU-wide uncertainty lingers, the incoming US administration's threats to impose sweeping tariffs may have a bearing on the prices of some common goods and perhaps distort the inflation scene.

The performance of European asset-backed securities (especially prime portfolios), nevertheless, should remain well insulated from any moderate signs of credit instability. However, non-prime and near-prime portfolios may have less space to manoeuvre and may negatively react with an evident impact on credit performance.

"Overall, we do not expect any significant deterioration as long as the macroeconomic environment remains in line with the current economic forecasts. Hence, our 2025 credit outlook is stable across the entire spectrum of European ABS securitisations," said Paolo Conti, Associate Managing Director of European Consumer & Corporate Securitisation Ratings at Morningstar DBRS.