As highlighted in a KBRA research report on solar loan ABS and prepayment rates in March, rising rates and continued home price appreciation led to a slowdown in existing home sales and refinancing activity, pushing mortgage prepayment speeds to cyclically low levels in 2023 and 2024. Solar loan prepayment rates fell in tandem as existing home sales have historically been one of the main drivers of solar loan prepayments, along with Investment Tax Credit (ITC) proceeds. As the Federal Reserve embarks on its current easing cycle, we expect mortgage prepayment speeds to gradually rise, as refinancing activity begins to pick up. However, with existing home sales likely to remain at depressed levels due to affordability issues, solar loan prepayment rates will likely oscillate around current levels for some time to come.

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Related Publications

• Solar Loan ABS: Credit Risks Rise as Prepayments Fall
• ESG: Residential Solar Loan ABS—Mostly Sunny With Clouds on the Horizon

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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