New issuers add welcome depth to UK RMBS

The UK Prime RMBS market has continued to evolve in 2025, with a broadening of its participant base driven by the entrance of two new sponsors (Nottingham Building Society and Newcastle Building Society) which have both priced inaugural deals this year. The removal of the Bank of England’s Term Funding Scheme (TFSME) facility has prompted building societies to seek alternative funding sources as final maturities under the scheme approach. The RMBS market hence presents an attractive funding solution, offering valuable diversification for institutions traditionally reliant on retail deposits. For ABS investors, the inclusion of these new issuers has added welcome depth to the market.

As of mid-year, the total outstanding volume in UK Prime RMBS stands at approximately £83bn, up 12% from 2022 levels, according to Citi. Year-to-date issuance has reached £5.25bn across 11 transactions, with supply well distributed between banks and building societies. Investor demand has remained strong, with most transactions being multiple times oversubscribed – underscoring the persistent appetite for high-quality UK Prime RMBS paper. Recent deals have cleared at spreads in the SONIA + high 40s to 50s area, representing a modest tightening compared to similar issuance earlier in the year. The latest addition to the issuer base, Newcastle Building Society, priced its inaugural Prime RMBS transaction last week, increasing the number of active issuers in the market to 13.

Looking ahead, issuance volumes are expected to pick up into the second half of the year. While 2025 began at a more subdued pace, with current issuance approximately 9% below the same point last year, several supportive factors suggest momentum will build. In particular, we expect the refinancing of maturing TFSME obligations and the favourable pricing dynamics in the RMBS market to drive further supply. Market participants broadly anticipate full-year 2025 issuance will exceed £10bn, compared to the £8.4bn issued in 2024 according to JP Morgan data.

In the near term, Santander returned to the market with a new £750m UK Prime RMBS deal last week, which is expected to be the final transaction before the usual summer lull.