Residential mortgage portfolio trading is more of a feature of the UK residential market than in the eurozone currently but Oakwood expects it to become standard practice overseas.
Portfolio trading is used as a method of de-leveraging a lender’s balance sheet but industry pundits say it will not help mortgage finance liquidity.
Richard Klemmer, partner at Oakwood Global Finance, said: “Our sense is that an increase in European portfolio trading won’t have too much of a noticeable effect at the retail level. Borrowers aren’t going to find any increase in the availability in funds because of this activity.
“We suspect that most of this is going to be from banks and lenders who are trying to shrink their balance sheets, particularly the Irish banks. They’re finding themselves in a situation where they simply need to de-leverage their balance sheets.”
Tony Ward, chief executive of homefunding, added: “Banks are rebuilding capital and de-leveraging their balance sheets and companies have to do the same. Mervyn King said that banks leveraging ratios were falling but he still wanted them to go lower.
“We have an over-leveraged system which is being de-leveraged, so you will see a number of activities continuing and probably picking up pace to de-leverage even faster. One of the ways to de-leverage faster is to sell company’s whole loan portfolios.
“It’s been happening already in the past four years but I agree with Oakwood, it’s certainly not going to stop and it will have to be far more widespread.
“What will it do to banks and availability of funding? It’s not really going to help, it’s what they’ve got to do to get their balance sheets de-leveraged and reinforce their capital.”
