JUNE 2016

C O M M E N TA RY

Robust Buy-to-Let
Loans within UK RMBS

Robust Buy-to-Let Loans within UK RMBS

Contact Information
Gordon Kerr
Senior Vice President
Global Structured Finance
+44 20 7855 6667
GKerr@dbrs.com
Asim Zaman
Assistant Vice President
Global Structured Finance
+44 20 7855 6626
AZaman@dbrs.com
Kali Sirugudi
Vice President
Global Structured Finance
+44 20 7855 6609
KSirugudi@dbrs.com
Keith Gorman
Senior Vice President
Global Structured Finance
+44 20 7855 6671
KGorman@dbrs.com

DBRS.COM

Table of Contents
Robust Buy-to-Let Loans within UK RMBS
Supportive Backdrop for a Growing Sector

3
3

Interest Coverage Ratio Stress Increases with Rates

Low ICR Coverage and Negative Equity Impact

Transaction Level Analysis Reveals Minimal Impact

Rental Increases Could Correct Concerns

Analysis Overview

Conclusion: BTL RMBS Robust to Rate Rises

Appendix 1: Transaction Level Results of Interest Rate and House
Price Declines
Appendix 2: Transactions Analysed

8
9
13

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Structured Finance: RMBS

13 June 2016

Robust Buy-to-Let Loans within UK RMBS

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Robust Buy-to-Let Loans within U.K. RMBS

Buy-to-Let (BTL) lending has grown from 120.6 billion of outstanding debt at the end of 2007 to 212.1 billion at the end of 2015
a 75% increase (CML, Feb 2016). Rising house prices, post-crisis reduction in lender loan-to-value (LTV) ratios and stronger
affordability tests requiring potential first time homeowners to save for larger initial deposits have made it difficult for first time
buyers to enter the property market and has driven an increase in rental property investment.
In this report, DBRS analyses BTL loans within U.K. residential mortgage-backed securities (RMBS) and the potential impact
a rise in rates and a fall in house prices could have on the loans and transactions. Overall, DBRS analysis finds that the vast
majority of loans are robust to the impact of these stresses, as the rental incomes from properties are able to absorb the rise in
mortgage payments. Where rental income is insufficient to service the mortgage, cases of potential losses exhibited following
sale of the property are expected to be low. Additionally, initial down payment requirements for BTL mortgages protect loans
from property price declines.
Supportive Backdrop for a Growing Sector
Taking into consideration socio-economic factors and demographic breakdown such as immigration and population growth, it
becomes clear why demand for rental housing has grown. Figures published by the Office for National Statistics (ONS) show net
migration has grown by 179,000 between September 2012 and December 2015, with the overall U.K. population growing by 7.75%
in the ten-year period between 2004 and 2014 (Figure 1 and 2).

66,000,000.00

350,000.00

64,000,000.00

300,000.00

62,000,000.00

250,000.00
200,000.00
150,000.00

60,000,000.00
58,000,000.00

Oct-15

Feb-15

Jun-14

Oct-13

Jun-12

Feb-13

Oct-11

Jun-10

Feb-11

52,000,000.00

Oct-09

Feb-09

54,000,000.00
Jun-08

50,000.00
Oct-07

56,000,000.00

Jun-06

100,000.00

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

Population

400,000.00

Feb-07

Net Migration

Figure 1: UK Net-Migration1 and Figure 2: UK Population Growth

Figure 1: UK Net-Migration and Figure 2: UK Population Growth

Source: Office for National Statistics, Migration Statistics Quarterly Report: May 2016 and UK Population Mid-Year Estimate, June 2015.

Nationwide Building Society estimates that average mortgage payments across the country for first time buyers can represent up
to 67% of take home pay. Growth in rental demand and a low interest rate environment heightened the appeal of BTL investments.
Added to this, ahead of the changes that came into effect in April 2016 was a tax landscape favourable for landlords, all of which
supported a surge in demand for BTL lending. As a result, privately rented properties grew from 11.43% of the housing stock in 2004
to 19.09% in 2014 (Figure 3). This is likely to have increased even further in 2015 with the ongoing growth in lending to the sector.

1. 2015 figures are preliminary. ONS figures provided between June 2006 and December 2011 are provided on a semi-annual basis. DBRS has applied a linear
interpolation to obtain quarterly figures.
Structured Finance: RMBS

13 June 2016

Robust Buy-to-Let Loans within UK RMBS

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Robust Buy-to-Let Loans within U.K. RMBS (CONTINUED)

Figure 3: U.K. Housing Stock by Ownership
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%

Owner Occupied

Privately Rented

Housing Associations

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

0.00%

Local Authority

Source: Department for Communities and Local Government, Table 101, April 2016.

BTL market growth has raised concerns among financial market participants, including the Bank of England,2 regarding
potential implications for the housing market and financial stability. The BTL sector is prominently featured in industry studies,
newspaper headlines and political agendas as a concern for the U.K. housing market. The Q4 2015 Bank of England Quarterly
Bulletin3 suggests approximately 15% of BTL investors would consider selling their properties if rental income were insufficient
to cover interest payments.
The industry standard affordability measurement of a BTL loan is evaluated against a benchmark 125% Interest Coverage Ratio
(ICR). Consensus view within the general population is that loans to BTL investors are often subject to less stringent affordability
tests than loans to owner-occupiers. Consequently, it has been speculated that BTL borrowers may be more vulnerable than
owner-occupiers to an unexpected rise in interest rates or a fall in income.
So, how resilient are BTL loans in RMBS transactions and what are the potential ramifications of rising interest rates and
declining house prices?
Assuming a 350-basis point (bps) rise in interest rates and a 20% decline in house prices, 2.92% would have an interest coverage
ratio less than 100%, and the mortgaged properties would be in negative equity based on DBRS analysis of an aggregated
collection of 58,143 BTL loans totalling 7.7 billion.

Interest Coverage Ratio Stress Increases with Rates

DBRS considers an ICR below the industry standard of 125% as a stressed base case scenario. In order to assess the impact of
rate rises, the sample pool of BTL loans was stress tested using various rate rises ranging from 50 bps to 350 bps from the current
interest rate of the loan. At current market interest rates, 1.78% of the loans have an ICR below 125% (with 0.21% of loans in a
negative cash flow position; ICR less than 100%).
For a 50-bps increase in rates, the percentage of loans by current balance with an ICR below 125% increases to 4.4%. A 350-bps
increase in rates results in 65.2% of the loans having an ICR below 125%. The figure released by the Bank of England in the
Financial Stability Report of December 2015 shows a 300-bps increase, resulting in nearly 60% of BTL loans having an ICR
below 125%. Therefore, the portfolios of loans found in BTL RMBS are in line to slightly better than the market demonstrated
by the Bank of England.
2. Financial Stability Report, December 2015 Issue No.38, Bank of England.
3. The potential impact of higher interest rates and further fiscal consolidation on households: evidence from the 2015 NMG Consulting Survey.
Structured Finance: RMBS

13 June 2016

Robust Buy-to-Let Loans within UK RMBS

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Interest Coverage Ratio Stress Increases with Rates (CONTINUED)

However, when viewed from a negative cash flow perspective (ICR less than 100%), the impact is less severe. A 50-bps increase
in rates results in only 0.32% being exposed to negative cash flow, with 27.8% exposed to negative cash flow following a 350bps increase. While much lower than the 65.2% for a 125% ICR threshold, 27.8% is still significant. More than a quarter of the
pool would be in a negative cash flow position. This could result in the potential sale of the associated properties, privately or
following the repossession process. Figure 4 shows the stress in the ICR for incremental interest rate increases of 50 bps.
Figure 4: Interest Rate Stress v ICR

Concentration (% Current Balance)

70.00%

65.19%

60.00%

51.94%

50.00%
36.17%

40.00%

27.76%

30.00%

22.99%

20.00%
10.00%

17.18%

13.99%
1.78%

0.00% 0.21%
0

4.41%
0.32%
50

8.09%
1.10%

5.62%

2.92%

100

150

200

10.20%

250

300

350

Interest Rate Stress (bp)

ICR<125%

ICR<100%

Source: DBRS.

The majority of mortgage loans in the portfolio analysed are floating-rate loans linked to 3-month Libor, BoE Base Rate (BBR) or
lender Standard Variable Rate (SVR) (Figure 5). The largest proportion are Floating Rate for Life mortgages based on 3-month
Libor with 57.6%. The next highest number of transactions in the pool are Fixed to Floating mortgages with 17.1%, followed by
Floating Rate for Life Mortgages based on the BBR with 16.4%.
Figure 5: Interest Rate Products
Interest Rate Index

Interest Rate Type

Total

3m Libor

Floating Rate for Life

57.57%

Fixed to floating

3.68%

Other

1.70%

Floating Rate for Life

16.43%

Fixed to floating

0.04%

Other

0.02%

Floating Rate for Life

1.07%

Floating Rate to SVR

1.20%

Fixed to floating

0.00%

Other

0.02%

Fixed to floating

17.14%

Floating Rate for Life

0.03%

Fixed to floating

0.70%

Other

0.42%

Total

100.00%

BoE Base Rate (BBR)

SVR

No Index
Other

Source: Pool Tapes, DBRS.com

Structured Finance: RMBS

13 June 2016

Robust Buy-to-Let Loans within UK RMBS

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Low ICR Coverage and Negative Equity Impact

In order to determine the potential for loss in a BTL portfolio, one needs to analyse stressed LTV ratios. According to CML
figures published in March 2016,4 average LTV ratios for BTL loans were 70% for purchases and 64% for re-mortgages between
2014 and 2016. The weighted-average indexed LTV of the analysed portfolio is calculated at 63.12% by DBRS.
DBRS stressed the potential negative equity impact by haircutting house prices in a rising rate environment. Under a high
stress scenario, for a 20% fall in house prices and a 350-bps increase in rates, 8.9% of loans with an ICR under 125% would be
in negative equity. These loans would have a higher mortgage outstanding than the value of the home and would be in a tight
mortgage payment coverage scenario (Figure 6).
Further analysis of loans in a 350-bps interest rate stress reveals that although for 28% of the portfolio rental income would
become insufficient to cover interest payments (ICR < 100%), the proportion in negative equity in an environment where house
prices decline by 20% is significantly lower at 2.92% (Figure 7).

10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

50

100

150

200

Figure 7: <100% ICR and Negative Equity

250

300

350

Concentration (% Current Balance)

Concentration (% Current Balance)

Figure 6: <125% ICR and Negative Equity

10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%

Interest Rate Stress (bp)

0% Haircut
5% Haircut
Source: DBRS.

10% Haircut

2.92%

50

100

150

200

Interest Rate Stress (bp)

0% Haircut
10% Haircut

20% Haircut

15% Haircut

5% Haircut

250

300

1.63%
0.94%
0.26%
0.04%
350

20% Haircut

15% Haircut

Source: DBRS.

Transaction Level Analysis Reveals Minimal Impact

An analysis of loans within outstanding BTL RMBS transactions finds that there are only a few select transactions that are
potentially exposed to a significant percentage of low ICR and negative equity loans in a stressed scenario. Stressing loans for a
rise in interest rates and a decline in house prices reveals that Celeste MF 2015-1 (1.84%), Hawthorn 2008-A (0.81%) and Paragon
15 (0.56%) have the highest level of loans that would be in negative equity and negative cash flow (Figure 8).
The amount of potential mortgages in negative equity and negative cash flow is still well below the level of credit enhancement
for the most junior tranche within most transactions. The lowest level of credit enhancement is in the Paragon 15 transaction,
with only 2.65% to the most junior rated tranche to cover the 0.56% of highly stressed loans. Across the other transactions, most
of them barely register any loans that would be in severe stress, ranging from 0% to 0.5% for the majority and three transactions
that register from 0.11% to 0.20%. Further transaction level detail can be found in Appendix A and B.

4. The Black and White of Buy-to-Let: What does the data show? , CML, March 2016.
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Transaction Level Analysis Reveals Minimal Impact (CONTINUED)

Figure 8: Transaction impact of loans stressed for interest rate rises and house price declines (% of pool)
Loss% 10% Decline

Loss% 15% Decline

Loss%
20% Decline

C/E Most Junior

Rated Tranche

Paragon No.7

0.00%

0.00%

0.01%

5.93%

Paragon No.8

0.00%

0.01%

0.03%

5.01%

Paragon No.9

0.00%

0.03%

4.81%

Paragon No.10

0.01%

0.04%

4.61%

Paragon No.11

0.02%

0.14%

4.04%

Transaction

Loss % No Decline

Loss% 5% Decline

Paragon No.12

0.00%

0.00%

0.00%

0.02%

0.09%

3.41%

Paragon No.13

0.00%

0.00%

0.01%

0.04%

0.11%

3.29%

0.01%

0.09%

0.28%

0.56%

2.65%

0.17%

0.18%

0.19%

0.20%

5.94%

Paragon No.20

0.00%

3.42%

Paragon No.21

0.02%

2.97%

Paragon No.22

0.01%

2.79%

Paragon No.23

0.02%

2.70%

Paragon No.24

0.03%

2.65%

0.41%

0.81%

25.40%

0.00%

0.05%

69.61%

Precise MF 2014-1

0.01%

6.37%

Precise MF 2014-2

0.00%

5.36%

Precise MF 2015-1

0.02%

5.23%

Precise MF 2015-2B

0.04%

2.44%

1.02%

1.84%

8.14%

0.00%

0.00%

15.30%

0.00%

6.62%

0.03%

4.63%

Paragon No.15
Paragon No.19

Hawthorn 2008-A

0.16%

0.05%

0.07%

0.17%

Gemgarto 2012-1

Celeste MF 2015-1

0.00%

0.06%

0.29%

GuildfordNo.1
RMS26
RMS28

0.01%

0.02%

Source: DBRS.

Rental Increases Could Correct Concerns

In a scenario where interest rates rise by 350 bps, the impact on the average mortgage loan could potentially be met by an
increase in rent charged by the landlord. This would require an average rental rise of 125 per month in order to meet the
increase in mortgage payments due. An average increase of 200 per month is required to bring the interest coverage to the
industry standard of 125%. The increases represent a rise of 15% (100% ICR) and 25% (125% ICR), measured against average
indexed rental incomes.
Depending on the relative nature of the housing market and the health of tenants, this rise would generally be on the steep side as a
percentage of the average monthly rent. However, if the rate rises were to occur over a timeframe of more than one year, this could
be spread out to be sufficiently absorbed. Nevertheless, this is dependent upon economic, housing, inflation and wage conditions.
A high proportion of the loans in the analysis that are exposed to negative cash flow under a 350-bps increase in rates are located
in London and the South East. Of the 27.76% with less than 100% ICR following a 350-bps rise in rates, 28.83% (8% of total pool)
and 27.89% (7.74% of total pool) are concentrated in London and the South East, respectively. The average rent rise in London to
bring rents up to a level to meet mortgage payments is 245 followed by the South East at 140. It is relatively realistic to expect
these landlords to have sufficient capacity to raise rents in these areas if there was an interest rate rise of 350 bps, given typically
strong rental demand.
Structured Finance: RMBS

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Rental Increases Could Correct Concerns (CONTINUED)

Figure 8 Regional Concentration, ICR <100% with 350bp Rate Rise
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%

Source: DBRS.

Yorkshire

West Midlands

Wales

South West

South East

Scotland

North West

North East

London

Unknown

East Midlands

East

0.00%

Analysis Overview
DBRS analysed a pool of BTL mortgage loans consisting of 58,143 loans totalling 7.7 billion, representing 3.6% of the total BTL
market (CML, Q4 2015). The analysed pool covers 26 U.K. RMBS deals originated between 2004 and 2015. Analysed loans are those
which are classified as performing or in arrears and sourced from the most recent available pool cuts as of 30 April 2016. Loans
without the necessary information such as rental incomes, origination dates, valuations and valuation dates have been excluded.
Loan level data has been sourced from the following public sources:
European Data Warehouse
EuroABS
Global ABS Portal
Trustee/Originator websites
Key inputs to the analysis are the rental income generated, property valuations and mortgage payments.
Rental incomes are provided as of the origination date of the mortgage loans. For the purposes of the analysis, DBRS indexed
the rental income, on a regional basis, using ONS Index of Private Rental Housing. The rental index covers a time period from
January 2005 until March 2016. For mortgage loans with origination dates prior to January 2005, the earliest observation was
used as a proxy for the rental index value at origination (16.42%). Index values for England (Excluding London) were used where
property region data was unavailable (0.9%).
Original property valuations were indexed using Nationwide House Price Index (Q1 2016). When determining the concentration
of the pool in negative equity and subsequent losses, DBRS applied haircuts to the indexed valuations.
Stressed mortgage payments were calculated assuming payment methods were of an interest-only or capital plus interest basis
where stated. The portfolio contained a small proportion of Endowment, Pension, ISA and Part & Part repayment types (0.39%).
DBRS assumed repayment for these loans is on an interest-only basis.
Conclusion: BTL RMBS Robust to Rate Rises
BTL transactions within the U.K. are relatively robust when stressed for interest rate rises and house price declines. While the
scale of at risk mortgage loans in a rising rate environment could get to be quite high, mortgage payments should still be able to be
covered. Without even considering the protection offered by step-in rights, the ability to raise rents and conservative initial loanto-value ratios provide for a low percentage of loans that could be exposed to negative cash flow and at risk of loss given a default.
Structured Finance: RMBS

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Robust Buy-to-Let Loans within UK RMBS

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Appendix 1: Transaction Level Results of Interest Rate and House Price Declines
ICR <100, 50bp Stress
Loss%
20% Decline

C/E Junior
Rated Tranche

Paragon No.10

0.01%

4.61%

Paragon No.12

0.00%

3.41%

Transaction

Loss % No Decline

Loss% 5% Decline

Loss% 10% Decline

Loss% 15% Decline

Paragon No.13

0.00%

0.00%

0.01%

0.01%

0.01%

3.29%

Paragon No.19

0.16%

0.16%

0.16%

0.17%

0.17%

5.94%

Loss% 15% Decline

Loss%
20% Decline

C/E Most Junior

Rated Tranche

0.01%

4.61%

Source: DBRS.

ICR <100, 100bp Stress

Transaction

Loss % No Decline

Loss% 5% Decline

Loss% 10% Decline

Paragon No.10
Paragon No.11

0.00%

4.04%

Paragon No.12

0.00%

3.41%

Paragon No.13

0.00%

0.00%

0.01%

0.01%

0.02%

3.29%

0.00%

0.00%

0.00%

2.65%

0.16%

0.17%

0.17%

5.94%

Paragon No.22

0.00%

2.79%

Hawthorn 2008-A

0.00%

25.40%

Loss% 15% Decline

Loss%
20% Decline

C/E Most Junior

Rated Tranche

0.00%

0.01%

4.61%

Paragon No.11

0.00%

4.04%

Paragon No.12

0.00%

3.41%

Paragon No.15
Paragon No.19

0.16%

0.16%

Source: DBRS.

ICR <100, 150bp Stress

Transaction

Loss % No Decline

Loss% 5% Decline

Loss% 10% Decline

Paragon No.10

Paragon No.13

0.00%

0.00%

0.01%

0.01%

0.02%

3.29%

0.00%

0.00%

0.00%

2.65%

0.16%

0.17%

0.17%

5.94%

0.00%

2.79%

0.01%

25.40%

Gemgarto 2012-1

0.01%

69.61%

Precise MF 2014-1

0.00%

6.37%

Precise MF 2015-1

0.00%

5.23%

Precise MF 2015-2B

0.00%

2.44%

Paragon No.15
Paragon No.19

0.16%

0.16%

Paragon No.22
Hawthron 2008-A

0.00%

0.00%

0.00%

0.00%

Source: DBRS.

Structured Finance: RMBS

13 June 2016

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DBRS.COM

10

Appendix 1: Transaction Level Results of Interest Rate and House Price

Declines (CONTINUED)
ICR <100, 200bp Stress
Loss% 10% Decline

Loss% 15% Decline

Loss%
20% Decline

C/E Most Junior

Rated Tranche

0.00%

0.01%

0.01%

5.93%

Paragon No.8

0.00%

0.00%

5.01%

Paragon No.10

0.01%

0.02%

4.61%

Paragon No.11

0.00%

4.04%

Paragon No.12

0.01%

3.41%

Transaction

Loss % No Decline

Loss% 5% Decline

Paragon No.7

Paragon No.13

0.00%

0.00%

0.01%

0.02%

0.02%

3.29%

0.00%

0.01%

0.01%

2.65%

0.16%

0.17%

0.17%

5.94%

Paragon No.21

0.00%

2.97%

Paragon No.22

0.00%

2.79%

Paragon No.23

0.00%

2.70%

Paragon No.24

0.00%

2.65%

0.04%

0.05%

25.40%

0.01%

0.04%

69.61%

Precise MF 2014-1

0.00%

6.37%

Precise MF 2015-1

0.00%

5.23%

Precise MF 2015-2B

0.00%

2.44%

Paragon No.15
Paragon No.19

0.16%

Hawthorn 2008-A

0.00%

0.16%

0.00%

0.01%

Gemgarto 2012-1

GuildfordNo.1

0.00%

RMS28

0.00%

15.30%

0.00%

4.63%

Loss%
20% Decline

C/E Most Junior

Rated Tranche

Source: DBRS.

ICR <100, 250bp Stress

Transaction

Loss % No Decline

Loss% 5% Decline

Paragon No.7

Loss% 10% Decline

0.00%

Paragon No.8

Loss% 15% Decline

0.00%

0.01%

5.93%

0.00%

0.00%

5.01%

0.00%

4.81%

Paragon No.9
Paragon No.10

0.00%

0.02%

4.61%

Paragon No.11

0.00%

0.01%

4.04%

Paragon No.12

0.00%

0.01%

3.41%

Paragon No.13

0.00%

0.00%

0.01%

0.01%

0.02%

3.29%

0.00%

0.02%

0.06%

0.10%

2.65%

0.17%

0.18%

0.19%

0.20%

5.94%

Paragon No.20

0.00%

3.42%

Paragon No.21

0.01%

2.97%

Paragon No.22

0.00%

2.79%

Paragon No.23

0.01%

2.70%

Paragon No.24

0.01%

2.65%

0.06%

0.11%

25.40%

0.00%

0.05%

69.61%

0.00%

6.37%

Paragon No.15
Paragon No.19

Hawthron 2008-A
Gemgarto 2012-1
Precise MF 2014-1

Structured Finance: RMBS

0.16%

0.01%

0.01%

0.02%

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11

Appendix 1: Transaction Level Results of Interest Rate and House Price

Declines (CONTINUED)
ICR <100, 250bp Stress
Transaction

Loss % No Decline

Loss% 5% Decline

Loss% 10% Decline

Loss% 15% Decline

Precise MF 2014-2

Loss%
20% Decline

C/E Most Junior

Rated Tranche

0.00%

5.36%

Precise MF 2015-1

0.01%

5.23%

Precise MF 2015-2B

0.00%

2.44%

0.02%

0.03%

8.14%

0.00%

0.00%

15.30%

0.00%

4.63%

Celeste MF 2015-1

0.00%

0.00%

0.01%

GuildfordNo.1
RMS28
Source: DBRS.

ICR <100, 300bp Stress

Transaction

Loss % No Decline

Loss% 5% Decline

Paragon No.7

Loss% 10% Decline

Loss% 15% Decline

Loss%
20% Decline

C/E Most Junior

Rated Tranche

0.00%

0.00%

0.01%

5.93%

0.00%

0.00%

5.01%

0.00%

4.81%

Paragon No.8
Paragon No.9
Paragon No.10

0.00%

0.02%

4.61%

Paragon No.11

0.00%

0.03%

4.04%

Paragon No.12

0.00%

0.00%

0.00%

0.01%

0.03%

3.41%

Paragon No.13

0.00%

0.00%

0.01%

0.02%

0.04%

3.29%

0.00%

0.05%

0.13%

0.24%

2.65%

0.17%

0.18%

0.19%

0.20%

5.94%

Paragon No.20

0.00%

3.42%

Paragon No.21

0.01%

2.97%

Paragon No.22

0.01%

2.79%

Paragon No.23

0.01%

2.70%

Paragon No.24

0.02%

2.65%

0.18%

0.34%

25.40%

0.00%

0.05%

69.61%

Precise MF 2014-1

0.00%

6.37%

Precise MF 2014-2

0.00%

5.36%

Precise MF 2015-1

0.01%

5.23%

Precise MF 2015-2B

0.03%

2.44%

0.26%

0.50%

8.14%

0.00%

0.00%

15.30%

0.00%

4.63%

Paragon No.15
Paragon No.19

Hawthorn 2008-A

0.16%

0.03%

0.03%

0.08%

Gemgarto 2012-1

Celeste MF 2015-1
GuildfordNo.1
RMS28

0.00%

0.02%

0.07%

Source: DBRS.

Structured Finance: RMBS

13 June 2016

Robust Buy-to-Let Loans within UK RMBS

DBRS.COM

12

Appendix 1: Transaction Level Results of Interest Rate and House Price

Declines (CONTINUED)
ICR <100, 350bp Stress
Loss% 10% Decline

Loss% 15% Decline

Loss%
20% Decline

C/E Most Junior

Rated Tranche

Paragon No.7

0.00%

0.00%

0.01%

5.93%

Paragon No.8

0.00%

0.01%

0.03%

5.01%

Paragon No.9

0.00%

0.03%

4.81%

Paragon No.10

0.01%

0.04%

4.61%

Paragon No.11

0.02%

0.14%

4.04%

Transaction

Loss % No Decline

Loss% 5% Decline

Paragon No.12

0.00%

0.00%

0.00%

0.02%

0.09%

3.41%

Paragon No.13

0.00%

0.00%

0.01%

0.04%

0.11%

3.29%

0.01%

0.09%

0.28%

0.56%

2.65%

0.17%

0.18%

0.19%

0.20%

5.94%

Paragon No.20

0.00%

3.42%

Paragon No.21

0.02%

2.97%

Paragon No.22

0.01%

2.79%

Paragon No.23

0.02%

2.70%

Paragon No.24

0.03%

2.65%

0.41%

0.81%

25.40%

0.00%

0.05%

69.61%

0.01%

6.37%

Paragon No.15
Paragon No.19

Hawthorn 2008-A

0.16%

0.05%

0.07%

0.17%

Gemgarto 2012-1
Precise MF 2014-1
Precise MF 2014-2

0.00%

5.36%

Precise MF 2015-1

0.02%

5.23%

Precise MF 2015-2B

0.04%

2.44%

1.02%

1.84%

8.14%

0.00%

0.00%

15.30%

0.00%

6.62%

0.03%

4.63%

Celeste MF 2015-1

0.00%

0.06%

0.29%

GuildfordNo.1
RMS26
RMS28

0.01%

0.02%

Source: DBRS.

Structured Finance: RMBS

13 June 2016

Robust Buy-to-Let Loans within UK RMBS

DBRS.COM

13

Appendix 2: Transactions Analysed

Transaction

Origination Date

Celeste Mortgage Funding 2015-1

2015

Gemgarto 2012-1
Guildford No.1

Aggregate Loan
Balance Analysed

Pool Concentration

218,043,407

2.83%

2012

18,028,633

0.23%

2015

326,258,769

4.24%

Hawthorn Finance Limited - Series 2008-A

2008

711,395,627

9.24%

Paragon Mortgages (No.7) PLC

2004

328,543,000

4.27%

Paragon Mortgages (No.8) PLC

2004

370,031,000

4.80%

Paragon Mortgages (No.9) PLC

2005

250,578,000

3.25%

Paragon Mortgages (No.10) PLC

2005

389,464,000

5.06%

Paragon Mortgages (No.11) PLC

2006

460,961,000

5.98%

Paragon Mortgages (No.12) PLC

2006

819,801,000

10.64%

Paragon Mortgages (No.13) PLC

2006

844,966,000

10.97%

Paragon Mortgages (No.15) PLC

2007

707,026,000

9.18%

Paragon Mortgages (No.18) PLC

2013

94,045,000

1.22%

Paragon Mortgages (No.19) PLC

2014

193,146,000

2.51%

Paragon Mortgages (No.20) PLC

2014

274,632,000

3.57%

Paragon Mortgages (No.21) PLC

2014

231,513,000

3.01%

Paragon Mortgages (No.22) PLC

2015

285,488,000

3.71%

Paragon Mortgages (No.23) PLC

2015

291,108,000

3.78%

Paragon Mortgages (No.24) PLC

2015

342,923,000

4.45%

Precise Mortgage Funding 1

2013

29,333,447

0.38%

Precise Mortgage Funding 2014-1

2014

57,381,515

0.74%

Precise Mortgage Funding 2014-2

2014

57,529,403

0.75%

Precise Mortgage Funding 2015-1

2015

123,325,148

1.60%

Precise Mortgage Funding 2015-2B

2015

221,307,286

2.87%

Residential Mortgage Securities 26

2012

4,009,816

0.05%

Residential Mortgage Securities 28

2015

52,180,698

0.68%

7,703,018,749

100.00%

Source: DBRS.

Structured Finance: RMBS

13 June 2016

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