Moving away from my regular update this week, I will assess some of the specialist lenders to have entered the market in the last 12 months: Advantage; db mortgages; edeus and Salt.
Will this market expansion create a marriage made in heaven, with new ideas being offered to avoid old ones being spread to the bone?
Backed by big names such as Morgan Stanley, Deutsche Bank and Oakwood (in part Merryl Lynch), the new entrants appear to be in it for the long-haul, unlike others who aim for a quick buck and then divorce soon after. In marital style, I will assess the old, new, something borrowed and, of course, something blue.
Brand awareness
Advantage is spinning the ADV message, which looks so hi-tech that I can see Daz or Persil snapping them up.
db mortgage’s strategy was different: it used a countdown-to-doom diary, outlining the woes of setting up a mortgage lender.
edeus, despite being one of the bigger investors in the market, ended up spending half of its initial budget on simply pronunciating its new brand – a rod for its own back, like the MI5-level secrecy that stopped it sharing its plans with us, even though this is actually what it’s all about.
The Salt promotional material and brand awareness releases work like a kind of reverse etch-a-sketch. I like it – but some of the messages in the e-mails seem to get lost in the prominent background.
Products
The products are generally pretty much what you would expect, however Advantage has introduced the shared appreciation Flexi-Share product to the market to assist first-time buyers on the property ladder.
Salt has introduced a separate mortgage product range based on the historically lower Swiss LIBOR benchmark – although, like the UK, this has recently risen.
edeus has opted for a strategy of two-year products for purchases and three-year products for remortgages. This is partly down to the free remortgage package it offers, but mainly an attempt to hold off rate tarts that bit longer. Such a tactic will probably become more established in the marketplace but is probably best served away from brokers who keep a closer eye on potential client revisits.
Technology
Right from the start, Advantage and edeus consciously made a play for this angle, believing it to be the best way to retain a margin. Despite automated valuation models (AVMs) being an integral part of edeus’s offering, it was just pipped to the bragging rights by GMAC-RFC’s Point-of-Sale Offer (POSO). Nevertheless, it heavily publicised its ability to process a remortgage in five days (from application to completion), which is possibly advantageous for customers desperate for a capital raise to hold off the heavies. However, for most of us who can time the remortgage to coincide with the termination of an old finance plan (typically the month-end), we just need assurance that it will actually happen rather than the number of days it will take – and I’m sure edeus won’t disappoint.
In a quest to start earning as soon as possible, db mortgages does not have the widely-criticised facility to ‘port’ mortgages. However, let’s not forget lenders are in it for the money and to sacrifice months of new business for the sake of such a nicety is perhaps a little too much to expect.
I can’t help but laugh at the thought of the sourcing systems trying to include Advantage’s Flexi-Share product in their systems. Absolutely no chance.
Borrowed People
Many of the new specialist lenders have ‘borrowed’ some of their leading lights from already established rival companies. However, they will need to prove that the grass is in fact greener on the other side to ensure they can keep them permanently. For a start, many of them will need to renew their hunger after being established and untouchable in their previous firms. But nevertheless, while not safe-proof, established names do help to open doors in this industry as we are still very much a people business (despite the continuous fanfare of technology being thrust down our throats). The big names also practically guarantee the lenders getting off to a flying start so they can make up any lost ground to prove they are worth their own weight in gold.
From my point of view, the real shame is that some of the most influential industry figureheads of our time have been rendered largely ineffectual this year by their previous master’s insistence on gardening leave. I think Monty Don could probably have run a prize marrow competition among the ex-HBOS staff this year and got a whole television series out of it.
Products
Here I look at their most likely targeted areas – near-prime and extra light adverse. The structure is now very well established with the only arbitration being whether to set extra light adverse at £2,500 CCJs or £3,000.
So how do they currently fair against each other?
Old Lending policy
None of these entrants have pushed the boundaries of criteria, preferring to operate within the relative comfort zone of the mass market akin to established players, such as BM Solutions and GMAC-RFC.
Blue
Those who didn’t attend the edeus launch party will be pleased to hear the dancing girls kept their togs on, but they still fill this category nicely for their advert featuring the long legs with a pole in the distance – you don’t need to be a genius to work out that HBOS’s infamous Howard could not have got away with that.
In conclusion, between them they are sure to be successful, but if we put aside organic growth in the market, I can’t help but think it will be a case of robbing from Peter to give to Paul – unless they decide to diversify down the risk curve later on. As things stand, service and procuration fees will be king.
