Challenger bank enters mortgage market

Challenger bank enters mortgage market

Challenger bank OakNorth has entered the retail mortgage market with the aim of building a loan book of £260m this year.

The bank, which has lent more than £3bn in loans since its launch in 2015, will offer mortgages to high net worth self-employed individuals, owners of small to medium sized businesses, and clients with "unusual" income streams.

Such individuals, the lender said, are often turned away from high street and specialist lenders as they do not pass the standard affordability assessments despite being asset-rich, as most banks only accept standard forms of regular income.

To address this niche in the market, OakNorth stated it would take a more "holistic" view of applications.

Applications will be looked at on a case by case basis and the bank will present a bespoke offer to the client after a standard fact find to establish their financial position.

The mortgages offered are on lifetime tracker rates. This means the policies from OakNorth will have interest rates set a certain percentage above the Bank of England base rate and will vary along with that rate.

The bank will primarily lend sums above £500,000 — but said in exceptional cases smaller loans would be considered above £250,000 — and the firm will aim to differentiate itself by providing quick turnarounds on decisions.

The bank’s mortgages are directly available to consumers — although the customer will talk to the company’s in-house advice team — and OakNorth will accept referrals from other advisers.

Such clients would also then be advised by the lender’s in-house advice team.

The team consists of Kevin Appleton, who joins from the Financial Ombudsman Service, Matthew McDonald, previously a broker, and Mark Howell, who arrives at the bank from the Bank of Ireland.

Valentina Kristensen, director of growth at OakNorth, said: "Over the past few years, we’ve provided loans to businesses and high net worth clients.

"Those businesses often said to us that they found it hard to get a mortgage as lenders don’t have the time to look at their case individually. These people are often foreign nationals or people looking for finance to develop."

Mark Howell, senior director of mortgages at the firm, said the company would consider broadening its market reach beyond high net worths further down the line.

He said: "We're an entrepreneurial bank, for entrepreneurs by entrepreneurs. We will be open to more ideas."

Ben Barbanel, head of debt finance at OakNorth, said: "High-street banks have limited mortgage offerings when it comes to borrowers who don’t have a regular or established source of income, such as the self-employed or business owners. 

"Private banks, on the other hand, tend to have high entry requirements that are unfavourable to most of these individuals.

"Lenders are typically unwilling to offer bespoke terms to their mortgage products and as a result, more than one in ten business owners in the UK are unable to access the finance they need to purchase their first home.