YORKSHIRE Building Society is forging ahead with a mortgage securitisation to raise about £500m, despite competition from a new state lending scheme for UK institutions.
Lloyds Banking Group, owner of mortgage lender Halifax, yesterday became the first bank to access the Bank of England’s Funding for Lending Scheme (FLS), drawing down £1bn.
Yorkshire, the UK’s second biggest lender, said it also plans to tap the BoE scheme for funds, but wants to keep wholesale channels open too.
Yorkshire’s latest residential mortgage-backed securitisation (RMBS) – called Brass No.2 – is being marketed among investors such as banks, pension and insurance funds. It follows the success of Brass No.1, launched last year, which raised £400m, and is secured against a pool of low-risk, owner occupied mortgages.
Chris Parrish, group treasurer, said: “Clearly Funding for Lending is very attractive and we will make use of it but we also want to maintain a presence in the markets. We will be doing some of each.
“The FLS is starving the market of issuance.
“We did our first securitisation deal last year and we gave an indication that we will be in the market once a year with a public size transaction. We want to keep our funding channels open.”
Mr Parrish did not disclose how much Yorkshire hopes to draw from the BoE scheme.
The FLS allows banks and other lenders to borrow at below-market rates, so long as they pass this on to homebuyers and businesses.
Mr Parrish said Yorkshire currently funds about 90 per cent of its lending with retail deposits, compared with a traditional 80/20 retail to wholesale split, and the RMBS will help rebalance this.
“This gives us funding diversity,” he said. “During the credit crisis we were more focused on retail funding so wholesale funding dropped to around 10 per cent. This is re-addressing that.
“There’s good market appetite. The market has recovered quite a bit post-crisis.”
Yorkshire did not reveal the coupon it will pay on the 1.85-year tranche.