RedZed Trust STC Series 2025-3 note ratings affirmed with stable outlook

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RedZed 2025-3 ratings stable

Highlights

Fitch affirms RedZed Trust STC Series 2025-3 note ratings (class A at AAAsf) due to increased credit enhancement from sequential payment structure in the first two years.
The share of STC loans in the pool rises to 23.0% by end-September 2026 from 20.0% at closing, raising portfolio risk as AAAsf default probability increases for residential (to 19.1%) and STC (to 54.4%) segments.
Australian economic fundamentals remain supportive, with GDP growth at 2.1% (year to June 2026) and unemployment at 4.7% in September 2026, underpinning stable transaction performance outlook.

Rating review reflects stronger credit support

As reported by Fitch Ratings, six note classes in RedZed Trust STC Series 2025-3 are affirmed at existing levels, with class A at AAAsf, class B at AAsf, class C at Asf, class D at BBBsf, class E at BBsf and class F at B+sf. The notes are issued by Perpetual Trustee Company Limited as trustee, and the securitisation is backed by first-ranking Australian conforming and non-conforming residential mortgage loans, alongside small-ticket commercial loans originated by RedZed Lending Solutions Pty Limited.

The agency says the sequential payment structure in the first two years has increased credit enhancement for the rated notes, helping support the affirmations. At the same time, the share of STC loans in the pool has risen to 23.0% by end-September 2026 from 20.0% at closing, adding to portfolio risk because those loans carry higher expected losses than residential assets.

Thirty-day-plus arrears stand at 4.6% at end-September 2026, although no losses have been recorded since closing. Fitch says the residential pool shows some improvement in loan-to-value metrics and a lower proportion of non-conforming loans, but the AAAsf default probability for that portion rises to 19.1% from 17.2%, mainly because of increased arrears. For the STC segment, the one-year probability of default remains at 1.7%, while the AAAsf default probability increases to 54.4% from 53.0% at closing.

Australian economic backdrop supports transaction performance

Fitch says amortisation in the STC pool is increasing obligor and industry concentration, with the top 10 obligors now representing 19.3% of the STC asset balance, up from 17.3% at closing. The agency also notes that recovery prospects remain stronger for residential loans, where the AAAsf recovery rate improves to 55.8% from 52.7%, while the STC recovery rate stays unchanged at 39.0%.

Liquidity risk remains limited, supported by a facility equal to 1.5% of the invested note balance, excluding class G, as well as structural features that redirect excess income toward principal repayment. Fitch also describes RedZed as an experienced specialist lender for self-employed borrowers and says its operational review finds the originator and servicer broadly comparable with the market.

The agency adds that Australia's economic growth and tight labour market continue to support portfolio performance. GDP growth stands at 2.1% in the year to June 2026, unemployment is 4.7% in September 2026, and Fitch forecasts GDP growth of 2.0% in both 2027 and 2028, with unemployment at 4.6% and 4.7% respectively.

A negative rating action could follow if the pool shifts further toward STC loans, particularly if faster residential prepayments raise concentration in the higher-risk commercial segment. Fitch says broader market and economic conditions also remain relevant to future transaction performance.

Our earlier article on sovereign resilience in a higher-rate regime explained how persistent geopolitical shocks and elevated fiscal spending can tighten refinancing conditions and raise borrowing risks, especially where inflation and funding costs stay high. We also noted that emerging and frontier markets are typically more exposed because debt-service burdens are heavier relative to narrower revenue bases, leaving less fiscal headroom when shocks persist.

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