Pepper shoved the widening woes of the late 2025 UK specialist RMBS market firmly into the past last week, when it priced Polaris 2026-1.
Tom Hall tells this week’s Another Fine Mezz that he was “blown away” by the senior pricing at 73bp over Sonia — 9bp tighter than the same issuer managed with same shelf in late October.
This time, the senior notes finished 2.8 times covered, which suggested there was plenty of demand issuers could soak up. Non-conforming RMBS spreads are now on the brink of becoming their tightest levels in four years. Yet how many issuers will take advantage of this is an open question, as they may not have that much collateral that needs financing.
Indeed, Pepper continued the trend for pre-funding originations, with 30% of the loans in its £391.1m deal to be sold into the SPV before the first payment date. Among those to prefund in public markets late last year were Equifinance, Paratus AMC and ColCap.
The popularity of pre-funding suggests that after a year of mostly favourable issuance conditions, lenders have built up some headroom to originate in the public markets or by bulking out their private facilities, or a bit of both.
It is hard to tell how much headroom each lender might have, but there are some publicly available figures that give an idea. LendInvest’s first half results for its 2026 financial year suggest the firm had £1.87bn of headroom in its funding facilities as of September 30, up from £1.72bn the year before. As of the same date, Together had headroom of £1.5bn, up from £990m in 2024.
Unused headroom is helpful if market conditions deteriorate, but it carries a cost so lenders tend to have an ideal number for it in mind. If a lot of lenders are carrying extra space, RMBS supply might disappoint as the lenders will run down their spare headroom before returning to market.
That said, there does appear to be some more supply in the works, across the buy-to-let and non-conforming sectors. Companies House filings show SPVs have been registered for Elstree 2026-1 Mix, Braccan Mortgage Funding 2026-1 and Together Asset Backed Securitisation 15 2026-1ST1, which suggests that deals are going to come from Enra, Paratus and Together at some stage.
The market looks in rude health, but healthy lending volumes will be key to supply coming through.
