Speaking to the Telegraph, Pateman criticised lenders for “crazy” practices and not factoring in whether borrowers would be able to afford a mortgage once the economy normalises.
He said: “When you see people lending high loan-to-values and doing affordability tests on current payment rates, that is just crazy, it is like shutting your eyes and hoping for the best,” said Steve Pateman.
“The big challenge for the economy is that when things normalise, by which I mean normal interest rates and normal inflation, managing the debt burden that the UK currently has will require quite a lot of sensitivity and intelligence.”
The chief executive also accused banks of preparing to lend on high loan-to-values without sufficient affordability checks.
“You are leaving yourself exposed to interest rate risk in a pretty big way,” he added.
“That is why the Bank of England gets concerned, because they worry about loose lending. In that regard, they are right to worry.”
Pateman’s comments come as Shawbrook announced underlying profit after tax of £67.3m for 2015, a 77% upswing from the previous year where it reported profit after tax of £38m. The bank’s commercial mortgage lending, of which around 60-65% is made up of buy to let, also increased dramatically, from £968m in 2014 to £1.6bn a year later.
Its gross lending for second charge mortgage deals reached £487.2m, rising from £401.3m in 2014.
Increased profits were driven by a 44% increase in its loan book, which surged to £3.4bn.
Shawbrook’s initial public offering on the London Stock Exchange last year also meant capital ratios were boosted with an extra £82m added to the bank’s balance sheet.
It said its focus on ‘high quality’ lending portfolios, supporting by prudent levels of capital, funding and liquidity would be maintained going forward.
Pateman said: “Our focus remains on serving customers who value a bank that takes the time to understand their requirements and provide the right answer. This approach also enables us to optimise our risk adjusted return profile. We have invested for the future and, notwithstanding a softer economic outlook, remain confident that we will continue to generate strong through the cycle returns consistent with our stated strategy.”
