Non-bank lender raises nearly £300 million – offers rates from 3.84%

London-based non-bank mortgage lender LendInvest Mortgages has successfully completed its sixth securitisation, packaging £285 million in UK prime buy-to-let and owner-occupied mortgage loans. This transaction, titled “Mortimer 2024-Mix Plc,” was its first owner-occupied offering and attracted strong interest, resulting in an oversubscribed issuance. The deal received high ratings, with S&P Global Ratings and Moody’s awarding Aaa(sf) and AAA(sf) ratings, respectively, for 86.5% of the loan pool.

This securitisation marks LendInvest’s sixth consecutive issuance since it launched its Residential Mortgage-Backed Securities (RMBS) programme in 2019. Notably, it includes LendInvest’s first securitisation of owner-occupied loans, following its entry into this sector in 2023.

The transaction, backed by 17 investors, achieved competitive pricing, with the senior tranche priced at 83 basis points over SONIA (4.95% today), indicating strong market confidence in the quality of LendInvest-originated assets.

As a result, LendInvest's total Funds under Management (FuM) now stand at £4.67 billion. Since its founding, LendInvest has provided over £7.5 billion in property finance, helping investors and homeowners across the UK access competitive financing options. 

Joint arrangers for this transaction included BNP Paribas and Citi, while JP Morgan, Lloyds, National Australia Bank Limited, Citi, and BNP Paribas acted as Joint Lead Managers.

Rod Lockhart, CEO of LendInvest, expressed his satisfaction with the transaction’s success, stating, “We’re pleased to announce the completion of our sixth securitisation, marking another milestone since we launched our RMBS programme back in 2019.”

The transaction builds on recent successes for LendInvest, which recently secured a £1.5 billion funding agreement with JP Morgan and expanded a warehouse facility with HSBC, BNP Paribas, and Barclays on improved terms. Additionally, the company experienced a surge in buy-to-let (BTL) activity, with £250 million in BTL offers between August and October—a 270% increase over the same period last year. Lockhart noted that despite economic uncertainties, particularly around the UK budget, the BTL market remains robust.

LendInvest’s RMBS programme provides investors with exposure to UK property assets and generates monthly income from a pool of mortgage loans. By retaining a portion of each transaction, LendInvest demonstrates its commitment to loan quality and to providing income-generating investments while freeing up capital for further lending.

LendInvest offers a range of products, including short-term, development, and buy-to-let mortgages, catering to intermediaries, landlords, and developers.

Since its inception, the company has provided over £3 billion in short-term, development, and buy-to-let mortgages, with prominent institutions like HSBC, Citigroup, and NAB as funding partners. In 2019, it became the first fintech to securitise a portfolio of BTL mortgages, setting a precedent in the industry. 

LendInvest’s current BTL offering includes:

• Finance up to £3 million, with 2-year rates from 3.84%
• Maximum LTV 80%
• Term length 7-30 years

This year, alongside LendInvest, other UK mortgage lenders involved in buy-to-let (BTL) securitisations have included:
 

1. Paragon Bank: Paragon has continued its BTL securitisations, leveraging its expertise in BTL lending and issuing several Residential Mortgage-Backed Securities (RMBS) this year to fund its growing BTL portfolio.
2. Kensington Mortgages: Known for its specialist mortgage products, Kensington Mortgages has issued securitisations in the BTL market, catering to demand from institutional investors for UK mortgage-backed assets.
3. Precise Mortgages (part of OSB Group): Precise has been active in the securitisation market, using it to finance its BTL mortgage lending. The lender is part of OneSavings Bank Group, which focuses on BTL and specialist lending.
4. Leeds Building Society: As part of its funding strategy, Leeds Building Society has issued BTL RMBS deals, reflecting its role in the BTL market and its commitment to diversifying funding sources.

Residential Mortgage-Backed Securities (RMBS) securitisation is a financial process that mortgage lenders use to raise capital by pooling together a selection of residential mortgage loans and selling them as securities to investors. Here’s how it works and why it’s beneficial for lenders:

How RMBS securitisation works

• Pooling mortgages: A lender gathers a group of residential mortgage loans, which may include both owner-occupied and buy-to-let mortgages. These loans are packaged into a single financial entity, called a "mortgage pool."
• Issuing securities: The mortgage pool is then divided into securities, which represent a claim on the cash flow generated by the underlying loans. These securities are structured into tranches, with each tranche having different risk and return profiles to cater to various investor preferences.
• Selling to investors: The tranches are sold to investors, who earn a return based on the principal and interest payments made by homeowners in the mortgage pool. Higher-risk tranches offer higher returns, while lower-risk tranches provide more stable, lower returns.

Why mortgage lenders use RMBS securitisation

• Access to capital: By selling RMBS, lenders can access substantial capital from institutional investors. This allows them to free up funds that can be used to issue new mortgages or support other areas of their business.
• Risk management: RMBS helps lenders transfer some of the risk associated with their mortgage portfolio to investors. In case of borrower defaults, the risk is spread across investors, depending on the tranche they hold.
• Cost efficiency: With access to cheaper funding, lenders can often provide competitive mortgage products. RMBS securitisation can reduce the overall funding costs for lenders compared to other borrowing methods.
• Balance sheet optimisation: By securitising loans, lenders remove these assets from their balance sheets. This helps improve their capital ratios, making them more financially robust and compliant with regulatory standards.

Investor appeal and regulatory oversight

• Attractive investment: RMBS are appealing to investors looking for a regular income stream, as these securities are tied to residential mortgage payments. They offer diversification and risk-adjusted returns.
• Regulatory compliance: RMBS issuances must comply with strict regulatory standards, including transparency requirements, risk retention, and loan performance disclosures. This compliance builds trust among investors and ensures alignment of interests between lenders and investors.

Example of RMBS in action

• For example, when LendInvest recently completed a £285 million RMBS transaction, it allowed the lender to raise funds efficiently while also sharing the loan performance risk with investors. This transaction freed up capital, allowing LendInvest to continue issuing new mortgage loans.
• Permanent Master Issuer PLC issued RMBS totalling approximately £11 billion in January 2024. This issuance was part of an established UK master trust programme, consisting of first-lien prime owner-occupied mortgages originated by Halifax/Bank of Scotland Plc. 
• Silverstone Master Issuer PLC, associated with Nationwide Building Society, conducted an RMBS issuance in April 2024. While the exact amount raised was not specified, this issuance was part of their ongoing securitisation programme.

Overall, RMBS securitisation enables mortgage lenders to improve liquidity, manage risk, and support their lending growth, while providing investors with a structured, income-generating investment in the UK residential mortgage market.