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Virgin Money to enter portfolio buy-to-let mortgage market

  • 27/02/2018
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Virgin Money to enter portfolio buy-to-let mortgage market
Virgin Money has announced it expects to enter the portfolio landlord market this year.

The announcement came as part of its annual results for 2017 in which the lender revealed it completed £8.4bn of gross mortgage lending – the same volume as 2016.

Investment in digital technology increased retention levels to 72% of mortgage customers, up from 68% in the previous year, and saw a noticeable growth in direct mortgage applications.

The slight growth of the market meant Virgin Money’s share slipped to 3.3%, however it noted this remained within its “natural long-term share of the UK mortgage market” of 3% to 3.5%.

“Overall, we achieved a market share of gross lending of 3.3% despite lowering volumes towards the end of the year to manage margins and protect returns in an increasingly competitive market,” it said.

“Further progress in our direct channel saw the number of mortgage applications increase by 12% from 2016 with the value of direct mortgages exceeding £1bn for the first time.”

It added: “We also expect to enter the specialist buy-to-let portfolio landlord market during 2018.”


Ring-fencing to increase competition

The lender has particularly focused on first-time buyer and new build within its mortgage proposition and appears to have succeeded.

Lending to first time buyers increased 20% year-on-year, while new build completions increased by almost 50% year-on-year.

And it expects the mortgage market to remain highly competitive this year with the introduction of ring-fencing predicted to increase pressures in mortgage pricing.

“As a result of ring-fencing, high street banks may deploy excess ring-fenced deposits into UK mortgage lending. We also expect that smaller lenders will seek to protect their market share,” it said.

“Overall, the mortgage market is expected to see modest growth, with UK Finance forecasting that gross lending will be £260bn in 2018.

“Within specific segments, lending to first time buyers looks set to increase further, supported by the tax changes to stamp duty and the £10bn extension of the Help to Buy scheme.

“Remortgaging will continue to represent a significant volume of overall transactions, as customers look to take advantage of competitive pricing in anticipation of higher interest rates.

“In contrast, the buy-to-let market is expected to be flat in 2017 as the recent regulatory and taxation changes weigh on customer demand,” it added.


Profit up, arrears down

Overall Virgin Money saw profits after tax increase by 37% to £192.1m, compared to £140.1m in 2016.

Mortgage balances increased by 13% to £33.7bn, from £29.7bn in 2016, while mortgage arrears dipped to 0.12%, down from 0.15% in 2016, which is below the latest UK Finance industry average of 0.82%.

Chief executive Jayne-Anne Gadhia (pictured), said: “I am delighted to report that our customer-focused strategy of growth, quality and returns continued to drive strong financial and operational performance in 2017.

“We generated market-beating growth across our core products as we continue to capture high-quality market share in mortgages and credit cards. We maintained our uncompromising focus on asset quality and we continued to improve our operating leverage,” she added.

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