Heavy equipment prepayments ebb
Lower prepayments could make for better returns for lenders
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.
