Meridian Funding 2026-1 secures Fitch expected ratings for UK home finance securitisation

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Meridian Funding Fitch ratings

Highlights

Meridian Funding 2026-1 PLC received expected ratings from Fitch ranging from AAA(EXP)sf on class A notes to B-(EXP)sf on class X, with final ratings pending closing documents.
MF26 includes 82.7% owner-occupied and 17.3% buy-to-let home finance plans with a GBP47 million prefunding mechanism, featuring higher post-switch collateral retention of up to 37% compared to MF 2025-1's 27.5%.
Fitch applies a 1.2x foreclosure frequency adjustment due to StrideUp's limited history and portfolio exposure, with stress scenarios indicating potential multi-notch downgrades under adverse conditions.

Expected ratings and transaction structure

As reported by Fitch Ratings, Meridian Funding 2026-1 PLC has received expected ratings ranging from AAA(EXP)sf on the class A notes to B-(EXP)sf on class X, while class Z is rated NR(EXP)sf. Final ratings remain contingent on the receipt of closing documents that conform to the information already assessed.

MF26 is the second securitisation of home purchase plans originated by StrideUp Homes Limited. The completed pool is set to include 82.7% owner-occupied assets and 17.3% buy-to-let assets originated between 2022 and 2026, with new home purchase plans able to enter the pool after closing through a GBP47 million prefunding mechanism, subject to conditions.

Fitch says the assets are low seasoned and that StrideUp's origination and underwriting standards are comparable with the prime mortgage sector in the UK. The agency also says its ratings do not address whether the transaction complies with Sharia principles.

The agency applies a 1.2x transaction adjustment to foreclosure frequency for both owner-occupied and buy-to-let sub-pools, citing StrideUp's limited performance history, significant exposure to foreign nationals and restricted refinancing options in the UK's Sharia-compliant lending market. MF26 is also set to enter a profit-rate swap with BNP Paribas S.A. and maintain a non-interest-bearing transaction account with Standard Chartered Bank under a murabaha structure to manage profit-rate and cash deployment mechanics.

Credit assumptions and implications for the UK securitisation market

Fitch says counterparty risk is sufficiently mitigated because key obligations carried out by BNP Paribas and Standard Chartered are backed by fixed asset purchase and sale pricing and remedial actions if either party falls below minimum rating thresholds. The structure also allows up to 37% of total collateral at closing to remain in the pool after a product switch, higher than the 27.5% allowed in predecessor deal MF 2025-1.

That higher retention capacity influences Fitch's prepayment assumptions. The agency applies an alternative high prepayment stress linked to the pool's reversion profile, with a floor of 7.5% during periods of limited reversion and a cap of 40% a year during peak reversion periods, lower than the 10% floor used in MF 2025-1.

In its sensitivity analysis, Fitch says weaker economic conditions, higher delinquencies and lower recoveries could pressure ratings across several classes, with a 15% rise in weighted average foreclosure frequency and a 15% fall in recovery rates potentially pushing class A to AA-sf and class B to A-sf. On the upside, stable to improved asset performance could support higher ratings for several tranches, although class A is already at the highest possible rating.

Fitch also says it did not receive or review Form ABS Due Diligence-15E for this action. It adds that a third-party assessment of the asset portfolio information found no issues affecting the rating analysis, and that the information used for the review is adequately reliable under its methodology.

Our earlier coverage of Saudi Real Estate Refinance Company RMBS-2 looked at Fitch’s final AAA(sau) rating on the senior sukuk in what it described as the first publicly rated Saudi-asset RMBS. We outlined how portfolio strengths such as seasoning and low loan-to-value supported low loss assumptions, while structural features—particularly pro rata amortisation and the way profit collections are allocated—could reduce senior protection until a switch to sequential amortisation. We also highlighted servicing and legal-transfer risks, including commingling exposure and the need to complete borrower notifications within a set timeframe.

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