Speaking exclusively to group editor of Mortgage Solutions, Victoria Hartley, Anth Mooney, CEO at Vida Homeloans and Belmont Green said the standard expectation for a licence is an 18-month to two-year timeline, but given the bank’s six-year track record and experienced personnel could be quicker.
“We’re profitable, we’re well funded. We’ve got a really strong risk and governance infrastructure – a lot of the capabilities that you would expect to see in a bank. We’ve got a senior leadership team now who really are a bank leadership team. But the timeline really will be dictated by the regulator, said Mooney.
The lender has been in talks with 40 or so investors to prepare the way for a capital raise for several months to secure the long-term equity investment needed to further accelerate growth with a formal launch in the Spring.
“We’ve got a lot of interest. So we’re looking forward to getting that done. I think as we look towards a banking licence, having the growth capital that you need already behind you is a big deal.”
The lender is also targeting £1bn plus in mortgage lending this year, roughly doubling the £500m it lent in 2021, though a drive into the credit impairment and residential markets.
Mooney said: “I think the landscape’s changing really quickly around us. Our main competitors as far as we’re concerned are the other specialist banks; OneSavings, Paragon, Shawbrook, Aldermore – they’re the guys that we see making real progress and that we look to compete with in the years ahead.”
Joining Belmont Green
After a long banking career at Northern Rock, followed by Virgin Money rising to director of financial services, top jobs at Thomas Cook Money and Caversham Finance followed for Mooney. He joined Belmont Green just before Covid hit in 2020, but the lender was forced to close its doors within a week due to the constraints of the securitisation lending model.
The “capital markets closed around us”, said Mooney, halting lending for just over five months, but the lender managed to get a securitisation away to finish the year “very strongly.”
Mooney overhauled the team during the pandemic and created a raft of new positions. Richard Tugwell joined as director of mortgage distribution, Mark Gordon as commercial director, Zach Hocking as retail savings director and Donna Weston and James Young as director of mortgage transformation and internal audit director respectively. Tommy Wight was promoted to COO, Iain Gibbons became marketing director and Giles Parker was appointed treasurer. Most recently, the lender has also bolstered its broker business development team with Helen Cawthra as corporate sales manager, Andy Alvarez to national sales manager and Scott Phillips to specialist distribution manager.
The lender said it has invested in the underlying platform and is building the underwriting capacity needed to take a huge leap in its lending ambitions.
Mooney said: “We would expect to lend more than a billion pounds for the first time this year.”
Targeting specialist growth
Mooney also predicts huge growth in both the specialist and residential lending arenas. The property shortage is driving higher house prices and, and therefore, the private rented sector will continue to play a really important part in terms of meeting UK housing needs. He said he expects the buy-to let market to hover at around the £40bn mark, but predicts more growth on the owner occupied side and from first-time buyers in particular.
“First-time buyers clearly will continue to struggle to cope with ever increasing house prices. So, gifted deposits and Bank of Mum and Dad and all of that good stuff will continue to play a big role but this doesn’t always necessarily work for high street lenders,” said Mooney.
“The growing gig economy and the shifting work patterns that that we’ve seen in recent years, much of which has been accelerated by what’s going on during the pandemic just means that an increasing number of people will have less traditional employment patterns, particularly self-employed or those working multiple jobs. Again, those types of profiles just don’t tend to fit with traditional high street lenders.”
He added that the increasing automation of underwriting and decisioning continues to alienate complex borrowers and push them towards the specialist market. He said he sizes the specialist market at about £38bn in 2021 with the pure specialist lenders accounting for about £20bn of that with another £15-20bn serviced by a mixture of building societies, new entrants and the smaller lenders that operate in that sort of near-prime space.
Does he expect the mainstream lenders to increasingly look to specialist to find margin long eroded by competitive pressure and low interest rates?
“There’s a resistance from the big lenders to take that risk if you want to call it that, because the commercial opportunity for them in real terms is not that big. Whereas I think for a smaller lender, like Metro Bank, then there’s a logic to it, because it has a greater overall impact on the returns that they can generate.”
He added that the Kensington offering is an opportunity for a larger bank to buy its way into the specialist market but has a hunch this won’t happen. He said organic growth into this sector over time from the mainstream lenders looks more likely.
Packager support
Vida is determined to increase its focus on packagers and strengthen its well-established relationships offering dedicated resource to some of these for the first time which is why it began paying one per cent proc fees to align itself with One Savings Bank.
“That is a fair reward for the work that packagers do. Of course, we benefit from the efficiency that that brings in our own business, and it gives us greater certainty and better conversion rates through the funnel and the pipeline. So, it’s a very important part of our distribution strategy.”
Strategy for 2022
In mid-January Vida Homeloans expanded its product range from 90 to 270 products, brought out product tiering and increased procuration fees to better cater for brokers with complex credit clients.
It increased its fees for buy-to-let and residential to 0.6 per cent, up from 0.5 per cent and 0.45 per cent respectively. It has also upped its packager proc fee to one per cent from 0.8 per cent. With rising rates and the credit issues emerging post-Covid, the lender’s focus is on making sure it has a strong remortgage proposition in place with plenty of tiering because the sourcing systems act as virtual gatekeepers to broker product placement.
Buy-to-let borrowers need a specialist lender due to the property or their employment status as self-employed or professional landlords, said Mooney.
“It’s slightly different in the residential market. There are a greater proportion of customers, so 30 or 40 per cent who have missed payments on their on their credit history, because of a missed utility or phone bill. This is not sub-prime lending. This is off-prime customers who can’t get a loan with one of the big lenders but, you know, have a typically have a very strong credit profile and payment track record,” said Mooney.
Vida has invested heavily in its service proposition to help brokers differentiate between its service and brand and other specialist lenders, he added.
“We’ve tried to automate as much as we can. On the front-end assessment of a case, we’ve tried to use external sources of data to just lighten the burden on the intermediary.”
The lender is looking to evolve its proposition away from 75-80 per cent buy to let to a 60-40 per cent buy-to-let residential split, eventually targeting a 50-50 split.
“Our intention is just to demonstrate over time that we can do it better,” said Mooney.
