Speaking to this publication, Vida Homeloans’ CEO Anth Mooney (pictured), said the firm had received around £1.2bn in mortgage applications in 2024 and that was likely to be around £2.5bn this year.
“That step change in scale just means that we’re more relevant in the mortgage market, and therefore it allows us to build out those stronger distribution relationships, because those guys are working with us more regularly.
“The volume and the growth ambitions that we have as a business, it does make a difference in starting to unlock the value of those distribution relationships over time,” he said.
In its latest annual report, Vida Homeloans reported gross new mortgage lending of £369m, with around two-thirds coming from buy to let (BTL) and the remainder from owner-occupied mortgages.
The growth in lending was attributed to improvements in its proposition and more competitive pricing due to a fall in funding costs.
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The lender secured its banking licence last year, allowing it to offer retail deposits and enhancing its funding base.
He said it had hit the £1bn deposits milestone “reasonably quickly”, adding that as a new entrant, it was “pretty reassuring”.
He said it would expect to get to around £2bn in retail deposits later this year and, over the course of the next five years, it was looking to get to around £6bn-7bn, which is “in line with the growth ambitions we have for the mortgage business”.
“We’ve only just really started. We’ve just added our ISA range at the start of April, so we’ll build that out. We’re just about to launch a range of easy-access accounts and we’ll continue to build out the proposition during the course of this year, and then that just gives us the opportunity to build balances over time,” Mooney said.
He noted that the “market is very competitive”, and as a new entrant, the falling base environment gives an “added incentive for customers to shop around a little” and it would be “looking to take advantage of that”.
“At this stage, our focus is really on providing decent value to customers, offering competitive interest rates and just establishing the brand in the savings market, and so far, so good,” Mooney said.
Consolidation in specialist lender space likely with few looking to get banking licence
Regarding the bank authorisation process, Mooney said it “found the process to be reasonably straightforward”.
“The regulators were incredibly supportive. I think most new bank applicants are start-ups and the typical timeline for a new entrant is probably something like three years to get a banking licence, whereas it took us 11 months from application to launch.
“That’s because we’re an established business, we’re profitable, we’re stable. We have the necessary governance model in place, we have capital. I think when you’re in that position… it’s slightly less onerous,” he explained.
Mooney said it was a “huge amount of work”, but if “you’ve got a stable business, then it’s far more doable”.
“I think in the specialist mortgage space, you can now see something of a divide between those lenders who are bank-funded, and those lenders who are wholesale-funded.
“I think without a banking licence, it becomes very difficult to grow in that space and compete in that space. I do think that we’ll see some consolidation in the specialist market, some of the smaller non-bank lenders will inevitably fall away, or be gobbled up by some of the larger players,” he said.
Mooney said he was aware of one or two non-bank lenders who have looked at applying for a banking licence and continue to look at applying for a banking licence, so there may be some lenders who follow in Vida Homeloans’ path.
“The specialist mortgage market has changed dramatically in the last three or four years. We’re now competing with large current account-funded banks, and that just wasn’t the case when I joined the business five-and-a-half years ago. I think without bank funding, it becomes increasingly difficult to compete at scale,” he added.
RMBS market in ‘rude health’
Mooney said the residential mortgage-backed securitisation (RMBS) market has been in “really rude health” for the last couple of years.
He noted that while there has been a “degree of uncertainty” since President Trump announced his raft of tariffs, consequently prices have risen and there has been a “degree of caution” in the last few months.
However, Mooney said there had been a number of deals issued from its peers in the market and conversations with investors around its own transactions suggest that the market is in “good health”.
“One of the main reasons why we decided to go for a banking licence is if you’re wholesale-funded, if the markets open, which most of the time it is, then everything is fine and being wholesale-funded is a perfectly good way to run a business.
“But when… anything happens in the macro environment, whether it’s the wars that we’ve seen in Europe, the mini Budget or the pandemic, markets can close overnight, and that uncertainty and lack of stability just makes it far more difficult to plan with any certainty,” he said.
However, he said the market at the moment is proving to be “resilient” and “very much open and in decent health”.
Landlords are being seen as ‘part of the problem, not as part of the solution’
Mooney said the “main worry” for the BTL market was that successive governments have “view[ed] landlords as part of the problem, not as part of the solution”.
“In terms of the housing crisis in the UK, I think that that mindset needs to change, because the private rented sector is going to have to play a key role… in solving the growing housing needs that we have in the UK.
“Regardless of whether the government hits their housebuilding targets, we just can’t build enough homes, so the continued headwinds that we see in the… buy-to-let market don’t really help,” he noted.
Mooney pointed to increased taxation, stamp duty changes, regulatory reforms, the Renters’ Rights Bill and Energy Performance Certificate (EPC) requirements and said they all “create headwinds for landlords”.
However, he said Vida Homeloans has seen “continued growth” in the specialist BTL market, which shows landlords are re-cutting their portfolios and investing in different types of properties as landlords look to improve yields.
“Despite all of those pressures over the last five years… the buy-to-let market has proven to be incredibly resilient, and I think that is simply because of the lack of housing supply and the continued customer demand,” Mooney noted.
He noted that one area of concern was that as smaller landlords step away from the market, supply becomes more constrained, and that pushes up rents for customers.
“We have to find a better balance, but the buy-to-let market is not going anywhere. I mean, it will change and adapt as it has over the past few… years, but the structure of the UK housing market means that it has to play a key role in providing reasonable, quality housing stock for people,” Mooney said.
More customers at ‘edge of high street lending policy’
Looking at residential lending for Vida Homeloans, Mooney said there had been “really strong demand”, lending numbers were “strong” and the quality of customers was “high”.
However, it was important to clarify that it was “not talking about sub-prime mortgage customers”.
“We’re talking about customers who are at the edges of high street lending policy. I think a lot of the larger lenders, as they’ve looked to automate their decisioning processes and streamline their underwriting processes… they’re looking for customers who are easy to say ‘yes’ to without too much effort.
“So, you do get a little bit of ‘computer says no’ type of stuff. The types of borrowers… that we would see are those who have slightly different personal income profiles. They may be self-employed, looking to buy a slightly more complicated property, they are relatively new to the UK, or they’ve just started their own business.
“These are not folks who’ve been bankrupt in the last three years. They’re just slightly non-typical,” he said.
He said it had seen around 15% year-on-year growth in the specialist market and that was being driven by people becoming “slightly less homogenous”.
“If you don’t have a flexible, human-driven underwriting approach, then it’s very easy to say no to customers who, on the face of it, might be slightly complex, but for us they’re an easy yes, because they’re really strong from a credit risk point of view.
“I think… there’s been a transition of customers from what would have been the high street, into that specialist space, and maybe more of an overlap now between that prime and non-prime market than there used to be. I think there’s a broader kind of grey area in the middle,” he added.
Looking at proposed reform from the Financial Conduct Authority (FCA), with one of the suggestions being that the loan-to-income (LTI) limit be re-examined, he said the LTI limit of 15% “certainly is constraining the industry in supporting more first-time buyers”.
“It prevents us from riding more business in that space, even though we have the risk appetite and the confidence in the customer risk profile to do that,” he said.
He noted that there was “strong demand” for higher-loan-to-value (LTV) deals from customers, and that customers are “looking for ways to make it work”.
“The existing regulatory rules and limits, I’m not saying that we should roll back on it all, but I think we’re now in an environment where we could give the industry a little more freedom to innovate, and in doing so, help more customers,” he said.
AI will impact mortgage market but human approach still vital
Mooney said AI was the “new shiny thing” and “everybody is working very hard to think about how AI can help in their business”.
“I think the obvious place that mortgage lenders seem to be going is we can use large language models to automate the decisioning process for our customers and get rid of all of our underwriters and save ourselves a fortune. I think, in the fullness of time, some lenders may well start to head down that route.
“For us, it’s more about: How can we use AI and other technology and data tools to make the lives of our underwriters easier? So remove some of the exchange of paper and automate some of those information flows so that our underwriters can really focus on the job of making that lending decision,” he said.
Mooney said it was about “using the emerging technology, whether it’s AI or other similar tools, to enhance the service that we provide to intermediaries”.
He noted that in the specialist lending space, he didn’t foresee a time in the immediate future where specialist lenders would move from the human-centred decision process, as it is “fundamental to what we do”.
Mooney said Vida Homeloans has started using a version of ChatGPT internally to help the underwriting and administrative team with sourcing and managing information, but it was a “self-contained in-house version”.
“I think most lenders will be experimenting and exploring the application of AI in some way, shape or form. It is the third industrial revolution, and it will impact the mortgage business,” he noted.
