Speaking at yesterday’s Financial Conduct Authority mortgage conference Olivier Defaux, managing director and head of European mortgage strategy at BlackRock, told delegates: “What we see as being attractive for our investors is the headwinds faced by banks creating opportunity for us.
“Basel III [and new taxes coming in 2018 mean] the cost bases of the banks are high which means mortgage lending for banks is becoming more expensive, therefore creating an opportunity for our clients.
“We see opportunities in lifetime mortgages and are trying to get into that market. We are also looking to enter the owner-occupied prime market.”
BlackRock manages money for clients and does not act as lender of record, preferring instead to fund origination by another lender and then purchase the assets for clients thereafter.
Defaux said: “We are looking to bring breadth of capital sources to the UK mortgage market: pensions and insurance companies have very long-dated liabilities and can invest in equity release and lifetime mortgages for example.
“Different types of capital have different types of needs: we are trying to bring diversity of capital to bring stability to the market.”
The UK housing market currently stands at £1.3 trillion of debt outstanding making it one of the largest asset classes in the country. However there has been little institutional investment in the sector.
Defaux added: “It is a new asset class so there are few investors who are familiar with it. Some have owned it in securitised format but it’s different from owning a loan. The educational process is one we have had to take our clients through, being pension and insurance funds.”
