The most significant change advisers are likely to see from the Shawbrook and TML merger is a wider representation of both brands, but it also brings stability of funding and cross-pollination.
“For both of us there was opportunity to grow – for obvious reasons there were challenging forces last year and that uncertainty created opportunity,” explains Eastgate.
“But the merger had been on our agenda for some time and the pandemic probably accelerated that thinking. We looked at what TML would get and what we would get, and both believed the whole would be greater than the sum of the parts.
“This will extend the Shawbrook name into distribution we have not had much exposure to before and for TML there’s the benefit of having a savings association behind them.”
The distribution changes will not come in overnight and the lenders will take time during this year to assess how to do it exactly, but there will be extra visibility and support from both sales teams.
“The TML salesforce will be representing us, they will be an introductory gateway and that makes us more resilient,” Eastgate continues.
“A mainstream broker is probably not going to come across a Shawbrook-type deal that often, this will just open up the opportunity for someone who wasn’t aware of Shawbrook before.”
The dual branding is already visible with Shawbrook being a prominent part of TML’s latest mortgage ranges.
“The aim is to reinforce the message that TML is backed by a retail bank and to show that we are permanently in the market,” Eastgate says.
“TML competes with a lot of non-bank lenders they have just created for themselves a point of competitive advantage.”
But is there a risk of the brands overlapping and confusing brokers and borrowers, or potentially even taking each other’s business? Eastgate believes that is unlikely.
“Distribution will play a large part and then it comes down to product design,” he says.
“Shawbrook has a long history of complex transactions in the buy-to-let (BTL) and commercial markets – these are not done by the more mainstream lenders like TML and its peer group.
“We’re very clear of the markets each business will point at and rather than cannibalise each other it gives us market options where TML has an avenue to route cases if they do not fit for it.”
Core lending markets
So with a deal intended on growing two businesses, where does Eastgate believe that growth will come from?
BTL is the prime opportunity, but perhaps surprisingly he also sees potential for the commercial lending sector despite its many issues at present.
“There’s going to be huge challenges across consumer landscape so if you want to get a mortgage its more difficult than it was a year ago,” he continues.
“So many people may have no option but to rent and that’s continuing a long-term trend, so I can’t see prices falling significantly and as a result BTL demand will be strong and very robust.
Eastgate notes the lender has been taking “very conservative views” on commercial properties with a focus on particular sectors away from those in challenging situations, and investors are returning.
“Commercial is very different, but there are parts that have been very resilient, for example, warehouse storage and semi-commercial have done very well,” he says.
“So these are the core markets for Shawbrook and TML but under slightly different situations, and that being the case, I believe for both firms growth will be underpinned by these two markets.”
Small and local businesses have done, perhaps counterintuitively, “really well” during the pandemic year as has warehouse and distribution space with the increased reliance on mail order.
“There are selective markets that we can rely on,” he adds.
‘Off the pace on bridging’
And then there is the bridging market which the lender notes is “very robust” at the moment, fuelled in large part by the stamp duty holiday, but also the need to renovate and convert properties.
Eastgate admits that after being in the market for 10 years the lender’s proposition in the area had “come off the pace”.
“So we have done a lot of with our bridging proposition after recognising that we needed to do some work on it – we’ve focused a lot of our investment in improving products and processes,” he says.
“It’s a big market for us and remains an attractive market. I think it will increasingly see people buying properties to add value.
“And it will be interesting to see how commercial spaces become residential spaces as planning regulation changes – we want to be well set to take advantage of that trend.”
Overall, Eastgate believes the housing market will remain resilient through the year and even if there is something of a dip, he argues the long term returns from property investment warrant confidence in a rapid recovery.