Irish Prime and Nonprime RMBS Performance Report: Q1 2025

Most European mortgage markets have been disrupted to some extent by the macroeconomic climate of the last few years, and Ireland has not escaped unscathed. Subject to inflationary pressure and the highest interest rates seen in decades, with the European Central Bank rate reaching 4.5% in late 2023 and only falling in H2 2024, a number of outstanding Irish RMBS transactions have shown rising arrears ratios.

In this report, we summarise our observations across the prime and nonprime sectors and discuss the key drivers of asset performance, as well as our expectations for 2025.

Key highlights include:
-- Arrears vary by sector and origination timing, with prime pools continuing to have historically low arrears.
-- Weaker credit profiles, a prevalence of floating-rate collateral, and adverse selection lead to significant arrears in nonprime transactions.
-- Prepayment rate trends align in both the prime and nonprime sectors.