What are the main positives and drawbacks of being a smaller lender?
The main positives relating to the scale of our business are that we can react quickly to changes in the mortgage market and this is done in conjunction with feedback from our intermediary partners. As an example, we recently recognised a need to support borrowers who wish to purchase a new build flat at 95% loan-to-value (LTV).
We were able to risk appraise the opportunity, set an internal appetite and launch a product on standard or shared ownership terms within a four-week window.
The main drawback we face is that although we work very hard to ensure intermediaries are aware of who we are and what we do, we don’t have the marketing budgets of the larger lenders to ensure a diverse marketing mix.
How do you decide lending targets?
Lending aspirations are driven by the society’s rolling three-year strategy. The strategy is informed by economic and industry forecasts. Mortgage growth is important to the society as long as it is profitable and aids our underlying capital reserves.
In terms of planning a strategy, how does this differ from the larger mutuals and lenders?
Strategic planning for any business is critical and it is no different at The Hanley.
Our business model of being retail funded and lending a proportion of these funds on residential property is one that has stood the test of time and has successfully weathered a range of financial and economic crises.
This straightforward model allows us to focus upon refining and reiterating our strategy, whereas in most cases the larger lenders have diverse strategies which can be complex and heavily resource intensive.
What are your target markets?
We target three segments of the residential mortgage market.
Firstly, first-time buyers. As a mutual it is engrained in our ethos to support people who want to get onto the property ladder.
The second target market is self-build. We’ve been helping self-builders to build or renovate their home for over a decade now and have funded hundreds of projects.
Self-build is a niche sector and we believe we have a wealth of knowledge and experience to support this market. At the end of 2017 we widened our distribution with the launch of self-build direct to the intermediary market to provide an additional option for intermediaries with self-build clients.
Our third target market is prime-owner occupier at the 80% LTV band. As well as serving the first-time market we are keen to help second time borrowers’ move up the housing ladder.
What are your aspirations for 2018?
Our aspirations are to grow our lending by six per cent, but more importantly in line with our profits to ensure our capital strength is maintained.
The numbers are only one aspect though, ensuring we continue to build valued long-term relationships with our intermediary partners is equally as important. To support this we will continue to invest in our staff and our online platform.
How important is the intermediary market to your business?
The short answer is extremely. Intermediary business accounts for 65% of our lending so it is a key business focus.
Our strategy of working with selected networks means we can provide a quality service to brokers and therefore the end customer. We also aim not just to support the market by being a product distributor but by being innovative and flexible.
We have many examples of this from our individualised approach to credit risk management to supporting customers who have had a life event and wish to get back onto the property ladder.