How to launch a mortgage lender

by: Mortgage Solutions
  • 15/02/2012
  • 0
How to launch a mortgage lender
Getting the launch right is key for any new mortgage lender. But how do you balance making a big enough splash to generate interest and get the brand known, while ensuring you are not overwhelmed with applications?

Offering insight into their experience of launching into the mortgage market are:

Rob Barnard, head of business development at Aldermore Residential Lending

 

Alan Cleary, managing director of Precise Mortgages

 

Sean Oldfield, CEO of Castle Trust

Rob Barnard, head of business development at Aldermore Residential Lending

 

When Aldermore launched its residential mortgage lending business in May 2010, the key issue we faced was controlling the volumes of new business applications.

To overwhelm a new business on day one would have been a disaster, but neither did we want eager underwriters sitting on their hands for too long.

The housing market was starved of funds and brokers were excited at the prospect of a new lender – we didn’t launch into a ‘normal’ market.

However, as with any new launch, gauging interest beforehand was very difficult and accurately predicting how many applications we would receive was almost impossible.

We therefore decided to go for a phased roll-out, working closely with key distribution partners. Prior to launch we shared our product and pricing plans with our distributors and took on board their feedback.

We wanted our initial launch proposition to be focused, concentrating on creditworthy residential borrowers being declined by automated credit scoring systems and also buy-to-let landlords who only had a few lenders from which to choose.

We created pre-launch awareness via a PR campaign and then supported the launch itself with trade-press advertising and email campaigns to intermediaries, as well as attendance at distributor roadshows.

We didn’t simply throw open our doors to all comers; we worked with distributors to roll out a communications programme to their members over a period of several weeks. That way, we could monitor responses and make any necessary adjustments to our plans.

This approach worked well. We were able to maintain a fast and responsive service from day one, had no systems failures or crashes and the feedback to our launch was very positive, as it has continued to be.

Getting a launch right is never easy, especially in today’s market, but the Aldermore Residential Mortgage launch was far more successful than any of us dared hope.

Alan Cleary, managing director of Precise Mortgages

 

It is a tricky balance to achieve the right level of market presence to exactly hit your volume targets and, in practice, it is very rarely ever achieved.

All lenders constantly tussle with volumes and service standards and, in the last few years when funding has been very tight and market volatility has been high, it has been a particularly difficult task.

Precise Mortgages launched right in the middle of the turmoil back in May 2010, so to say it has been an interesting journey so far is probably an understatement.

We have invested heavily in our brand to ensure that brokers know what we stand for and this is now starting to bear fruit.

Our message has been about supporting intermediaries, providing good service and delivering product innovation.

Since launch, we have widened our product offering into near prime residential loans and, most recently, into short-term lending and bridging. We have continued to innovate having just recently brought joint legal representation to the bridging market, which saves borrowers time and money.

The key thing in this market is knowing your customer and our customer is the broker – we try to do all we can to ensure we listen and react to feedback.

Our service standards have been very good, with decisions made in minutes and the ability to offer and complete loans when the broker needs them. Even in this market, we give plenty of notice of product withdrawals.

This year has started well for us and I believe it should be a good year for the broker market too, because the number of brokers and the market size have balanced out.

Whilst I take nothing for granted, I hope that we are through the worst and can start looking forwards rather than backwards.

Sean Oldfield, CEO of Castle Trust

If there has been a golden thread in Castle Trust’s preparations to launch, it has been credibility; the credibility of our board and management, the credibility of our mission, the credibility of our plans and the credibility of our actions to deliver those plans.

What do we plan to do?

We will offer shared equity mortgages for 20% of the value of an owner-occupied home to borrowers with a traditional repayment loan of 60% or less and a 20% deposit or more.

We will fund our mortgages with fixed-term investments tied to the national house price index. The amount of investment we take in determines the amount we will lend with our mortgages.

This is the “what” – we believe it is credible, because the scale of the mortgage business is due to the scale of the investment side, so we will grow in a secure and sustainable way.

Our ability to deliver that plan hinges on communicating our beliefs with transparency and clarity. We have spent months working with the Plain English Campaign to ensure our online and offline literature does the best job it can to explain our products to the public.

We also want our potential customers to get the best advice possible when they are considering our products, so we have worked with the Chartered Insurance Institute to ensure our adviser training course counts towards the continuous professional development of mortgage advisers.

We will only use advisers who have passed a CII-accredited course. This too will help safely control the rate of take up in the early days.

Finally, the credibility of our mission comes from our belief that shared equity mortgages are a solution for our times.

They reduce the risk of repossession and arrears, a growing problem in our economy, because borrowers have lower monthly commitments to maintain their mortgages. They also reduce the risk of negative equity and reduce the borrower’s exposure to rising interest rates.

For us, in the lead up to launch, it’s all about credibility – and that is what we will try to continue building until we open for business.

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