OREANDA-NEWS. Fitch Ratings says that there is no impact on the ratings of the Fastnet Irish RMBS transactions from Permanent TSB's introduction of new variable rate mortgage products. This fits into a general trend across Irish lenders to lower both variable and fixed interest rates on their mortgage loan products.

Permanent TSB has announced the introduction of new variable rate mortgage products, linked to a managed variable rate (MVR). These new rates will be available to borrowers currently paying the standard variable rate (SVR) on their existing mortgage loans (excluding buy-to-let customers). The conditions of the new mortgage product include an updated valuation of the collateral property. The SVR is currently 4.5%, but the MVR will initially range from 3.7% to 4.3% depending on the current loan-to-value ratio (CLTV) of the borrower.

Fitch has received confirmation from Permanent TSB that borrowers who decide to switch to the new MVR from their current SVRs, will remain in the securitised pools. Such product switches are envisaged by the RMBS documentation. The lower rate received by the issuers could result in some excess spread compression, although borrower affordability levels will also improve and the updated CLTV will provide a clearer view of the credit quality of the loans.

For Fastnet 3, 9 and 10, which are rated by Fitch, the current portions of SVR loans in the pools are 20.7%, 55.4% and 24.5%, respectively, and will build up to 22.9%, 61.2% and 25.5% as fixed rate loans revert to SVR. If all SVR-paying borrowers switch to the new MVR, Fitch expects excess spread levels to reduce by approximately 37bp for Fastnet 9 and 5bp for Fastnet 3 and 10, based on an approximation of the CLTV levels using indexation. Currently net excess spread excluding recovery proceeds stands at 34bp, 185bp and 44bp for Fastnet 3, 9 and 10, respectively.

Fitch typically assumes an SVR in the range of 2.0%-2.5% above Euribor in its analysis, as it is set at the discretion of each lender. The reduction in excess spread expected as a result of the switch to MVR is within the assumption applied in the analysis of Fastnet 3, 9 and 10 and therefore there is no effect on the notes' ratings.