Issuers of mortgage-backed securities are having to make changes to the structure of their offers to deal with the fact that borrowers are holding on to their mortgages for longer.National Australia Bank priced an RMBS transaction last week that included a tranche of soft bullet notes. No principal will be paid to the A1 note-holders prior to the scheduled maturity date, which is on the second anniversary of the issue. Any principal that would have been paid to A1 note-holders will be directed to the A2 note-holders.National Australia Bank's senior treasury manager, securitisation and funding, Eva Zileli, said domestic investors had a preference for notes with a weighted average life of around three years.By passing the principal payments on the bullet notes to the A2 note-holders, NAB was able to achieve a weighted average life of three years on those notes.No official figures on changes in the average life of home loans are available, but last month Mortgage Choice reported that the average life of the $42.4 billion of loans on its books had increased from 3.5 years in 2006 to the current level of five years.Zileli predicted that soft bullet structures would become a more common feature of RMBS issues.NAB's issue, National RMBS Trust 2011-2, was upsized from A$750 million to $1.5 billion.The US$401 million A1 soft bullet tranche, which was rated AAA and has a weighted average life of two years, was priced at 115 basis points over the three-month US dollar Libor rate.The A$1.005 billion A2 tranche, which was rated AAA and has a weighted average life of three years, was priced at 120 basis points over the one-month bank bill swap rate. Spreads have widened since NAB's last issue. In May, it paid 100 basis points over the swap rate for the A$720 million A1 tranche, with a weighted average life of three years.