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Clydesdale launches bond to back residential loans

Clydesdale Bank has launched a £1.5bn covered bond backed by residential mortgages.

The total number of mortgage accounts in the cover pool is 14,948. The average LTV of the loans is 63.5%. Clydesdale will use money from the bond to fund its operations, including mortgage lending. Moody’s has given the bond a AAA rating.

Covered bonds are securities backed by mortgages although the key difference between these bonds and residential mortgage-backed securities is that the originator keeps the loans on their balance sheet.

Jonathan Clark, mortgage partner at Chadney Bulgin, says: “Clydesdale operates in areas of the market that other lenders do not, so it is good that it can secure this sort of funding.”

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