The mutual said this was off the back of a remarkably successful 2020 which saw its gross lending hit £253.2m amidst a busy market.
Saffron said the decline in lending was expected as part of its long-term strategy was to address the growing number of complex cases and increase focus on margins over volume lending, and a greater investment in manual underwriting.
The lender said the property market boom, boosted by the stamp duty holiday and support from the government, led to a strong 2020 but posed “an educating challenge” in 2021.
‘A successful dip’
Tony Hall (pictured), head of mortgage sales, told Mortgage Solutions: “Our lending strategy was changed in 2020-21 to move toward a specialist model focussed on margins over pure volume, making sure we’re maximising our return on capital as opposed to just lending on any level. We changed to a manual approach to underwriting to take care of people who need lender support like self-builds and the self-employed.
“There was a dip, but it was a successful dip, if that makes sense? In 2020 we also had a first-time buyer product that we did really well from, but it’s about having good value range of products in the long run.”
Colin Field, CEO, said: “To say I am delighted to have added another £243m of new mortgage origination would be an understatement. I must tip my hat to the great work of the society’s dedicated teams and their ability to adapt not just in the way they worked, but also in our range of mortgage products. This has been paramount to our success.”
The lender re-introduced its first-time buyer (FTB) at 95 per cent loan to value (LTV) in 2020, then pulled out as it reached capacity. Later in 2020 it re-entered the buy-to-let (BTL) market after it hit its regulatory buffers in November, but came back with limited company BTL lending in March 2021.
In 2021, it relaunched its 95 per cent loans for FTBs and followed that up by re-introducing its pre-pandemic 95 per cent LTV second time buyer loans. It then upped its 80 per cent LTV to 90 per cent LTV loans for self-employed and contractor one- and two-year trading loans, which Hall said “all landed us a big win.”
It is looking to re-enter more products later this year.
Field said: “To remain as competitive as possible, we managed rates efficiently. We also adjusted product criteria to ensure fairness for those impacted by the pandemic, such as the self-employed. Importantly, we have been able to enter or return to areas of the market we haven’t been in for some time, such as limited company buy to let.”
Hall said: “Our pricing is competitive and we’re seeing good volume across joint borrower, sole proprietor products to help FTBs.”
‘We are 100 per cent intermediary-reliant’
The relativity of volumes against the market size limits Saffron BS at this stage in its development, so intermediary relationships are “paramount” to its success and constitute its most valued partnerships.
Hall said: “We are 100 per cent intermediary-reliant. My role is building that relationship with key partners and every other intermediary that wants to use us.
“The big focus for us is our service and delivery – it’s as much about how easy it is to do business, not just the rate – it’s who will do the deal and how well they will support the broker and the client.
“It’s about delivering and providing a quick answer to a DiP (decision in principle), and we support their enquiries.”
Over the past 18 months, Hall’s mortgage sales team has grown “significantly” to provide improved access to its business development managers (BDMs) via phone, email and in the field.
Hall said: “We’ve grown from two and a part-timer to 11 since Autumn 2020, three of which are in the field. We’re currently recruiting another BDM but that’s it for this year, so we’re going to embed them properly before making our next move.
“We’ve got distribution in a much better place through the networks and clubs and we’re working closer with them than ever.”
Adapting to the challenges ahead
In spite of a lending decrease from 2020, the 2021 figures remain one of the best years on record for the mutual and are in line with Fields’ predictions given the impact of Covid-19.
Field said: “The economic impact on the society from reduced interest rates significantly impacted our bottom line. Our underlying business remained strong and the impact was an expected one-off for the business, which our end-of-year results prove as we report growth in profitability in line with post-pandemic results.”
Hall added: “We’ve got a big product development map but we’re tracking where we are at this stage as we’re in the middle of a core system upgrade which limits our ability to launch new products, but we’re planning to be in as many specialist markets as possible as we go.
“That said, we’re still focussed on the residential and buy-to-let space and we’ve got products for both markets, and the appetite to launch a new product and support new markets wherever we can – if we can support it, we are heading for it.”
Although cautiously optimistic about the year ahead, Field said there are still many hurdles to navigate in the current economic climate.
He said: “Saffron will continue to adapt to the challenges that arise. We will focus on lessening the financial impact on our members and assisting as many people as we can to understand, manage, and improve their financial wellbeing and promote money happiness. Something we all deserve.”
