Moody's Investors Service predicts that Turkey will produce several mortgage deals this year, provided that a mortgage law is passed, the agency said in a report on EMEA structured finance. The government's failure to enact the completed mortgage law in 2006 stood in the way of the market's inception, the agency said. Further delays could drive originators to seek offshore platforms for issuing such deals.

Even with the law, it remains unclear whether covered bonds or more traditional RMBS will win favor with originators. "It is yet to be seen which of these two alternative products would gain popularity with Turkish banks, while they would be weighing capital relief advantages of RMBS versus maintaining the size of their loan portfolio - and market share - with covered bond structures," Moody's said.

Mortgage and consumer lending has taken off in the past few years in Turkey, although the former slowed down after a patch of market volatility pushed up interest rates in May 2006. Still, a combination of factors should keep this expansion going, Moody's said.

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