OREANDA-NEWS. Fitch Ratings believes the performance of assets backing South African structured finance will remain stable across most asset classes in 2015, despite the country's economic challenges. Fitch consequently expects the South African structured finance transactions it rates to continue to perform within expectations.

Despite slow economic growth, we expect unemployment to remain broadly stable in the near term, which should preserve the steady performance of residential mortgage loans and consumer secured loans. In addition, the current inflationary recess has reduced the risk of a sharp rise in interest rates. However, unsecured loans continue to exhibit high arrears and we do not expect their performance to significantly recover in the near term.

Prospects for new household credit are mixed. While unsecured lending is contracting, the mortgage market has become unexpectedly dynamic in the sluggish economic environment of 2014. In our view, mortgage lending may have benefited from the large clearance of defaulted loan books over recent years. We believe it will keep growing moderately in 2015.

In our view, the Committed Liquidity Facility, promoted by the SARB to help banks meet regulatory requirements, which became effective on 1 January 2015 , may restrain securitisation activity. This will depend in particular on the terms of repayment of the facility, and whether this can be used as a long-term funding tool by banks. Greater clarity on these issues should emerge during 1H15.

Our performance outlook for assets in ABCP conduits remains stable, as do the Rating Outlooks for sponsor banks on the national South African scale (zaf). However, the extent of recovery in ABCP issuance from the sharp decline in 2014, caused by regulatory uncertainties and the failure of African Bank Investments Limited, remains to be seen.