Prepayments on securitized heavy equipment loans have started to decline, after remaining elevated since the pandemic, JPMorgan Securities data shows.
The 2023-vintage heavy equipment securitizations saw an average prepayment rate of 9.75% from July through November. That compares to an average rate of 11.77% during the same period in 2022, and 10.12% in the same five-month period in 2021.
A lower prepayment rate could imply several factors in the market, such as erosion of borrower financials. But higher prepayment rates could also have been a result of increased government spending, such as Payroll Protection Program handouts, which improved companies’ balance sheets.
Indeed, 30-day delinquencies on heavy equipment loans jumped last month to 1.13% from 0.95% in October. In November 2022, the 2022 vintage showed a 30-day delinquency rate of 0.74%.
Lower prepayment rates are generally good for lenders, because they imply a greater return on their outstanding loans.
