Starling Bank’s acquisition of Fleet has removed the glass ceiling – Young

Speaking with Specialist Lending Solutions, Young said it was already doing well without Starling’s investment, but the funding would allow it to go beyond its current limits. 

He said the buy-to-let lender’s goal was to lend up to £2bn a year. 

“Last year we lent for only two-thirds of the year and did £420m. This year we’ve hit £400m without Starling’s help at the halfway point. We’ll come in at around £800m — all of that will be primarily without Starling’s help. 

“Our natural limit was about £700m a year, with Starling we see an opportunity to go £1.5bn, possibly £2bn a year,” Young said. 

He said the lender’s ambition to reach that target would be set in motion by the end of this year, as its current securitisation phased out in autumn. 

Young added: “If we don’t hit £1.5bn by the backend of 2022, I’ll be very surprised.” 

Changes at the lender 

Young said the acquisition also meant Fleet could diversify its offering, as forward flow agreements tended to result in loan books being homogenous as investors want the notes to be similar. 

He also said being funded by a bank would give Fleet access to the government’s term funding scheme. This would mean if another financial crisis was to happen and the securitisation market dried up, it would be able to continue operating. 

“This gives us continuity of lending which is brilliant,” Young said. 

He also said the access to cheaper funding would allow the lender to develop better priced products. 

Young said: “There won’t be any great changes in terms of products until we have funding solely from Starling which will be in September.  

“Our products are mid-range at the moment, there’s a bit of scope in the short-term but that’s to be agreed with our funders. Once we are funded solely by Starling, then the market can look forward to Fleet being up close to the top of best buy tables.” 

Although management and the running of the lender will remain the same, Young said the acquisition will also give Fleet’s employees the chance to grow in their roles and gain more responsibility. 

“They will expand to meet the business volumes that we write. We’ve got people we’ve worked with for 15 or 20 years, who joined us from CHL Mortgages and they are really high quality people.  

“The acquisition by Starling takes away a bit of a glass ceiling. Because if you’re bumping along at £700m a year, there’s no real growth for individuals, they will be doing the same thing year in, year out.  

“If we increase the figures, we increase the number of staff and increase opportunities,” he added. 

Room to grow

Young said Fleet would be focusing on buy-to-let lending as it had done since its establishment seven years ago. 

However, he hinted the industry should anticipate an expansion into new segments of the mortgage market, of which Starling would be supportive. 

“First we want to increase our share of the buy-to-let sector,” he said. 

Young suggested there was scope to grow further in buy-to-let, due to changing investor types, and the maturing of fixed terms following landlord tax changes. 

He added: “I don’t know how many times I’ve read over the last 20 years about the death the private rental sector and that buy-to-let is a walking corpse, it’s simply not true. In the emergence of new types of investors, we’ve done away with dinner party landlords. We’re now seeing more thoughtful investors in buy-to-let.  

“We see the market as quite buoyant.”