The recondite niches of the mortgage marketplace post-credit crunch are becoming key battlegrounds for a number of new challenger lenders.
One of the new entrants is Belmont Green which last year launched Vida Homeloans under its intermediary only specialist banner.
Unlike established large retail and commercial banks, new entities can use the latest technological innovations and are not tangled up in legacy system which are typically complex and costly, according to Louisa Sedgwick, director of sales at Vida Homeloans.
The issues that arise from operating a legacy system is, according to Ms Sedgwick, likely to hinder larger lenders such as her previous employer Leeds Building Society, where she spent two years as head of corporate accounts, then head of intermediary distribution.
She said: “A number of lenders will have to integrate their platforms and Leeds was not in the position to do so with their existing IT.”
Breaking away from a large business and thus the associated benefits that come from working within such organisations is not the easiest of feats, as Ms Sedgwick acknowledges.
She added: “I really enjoyed my time – it was a great place to work but I wanted to focus on mortgages for the underserved areas of the market and Leeds was not in a position to do that.”
Ms Sedgwick described Vida, which gained FCA approval in September last year, as a modern lender in that it adopts the latest technology to support and inform the human decision-making process. To this end, the whole mortgage application process for Vida customers can be completed online – no paper required.
The business raises capital through an equity partner based in the US and two warehouse lines of credit. Securitisation is not yet a funding source for the company, although this will be explored “once we have built a big enough loan book,” Ms Sedgwick said.
Vida specialises in underserved areas of the mortgage market such as the recently self-employed and borrowers who are retired or approaching retirement.
The lender is also active in the resurgent sub-prime market, widely seen as the catalyst behind the 2007/08 global financial crisis and the ensuing recession.
The stigma attached to such lending is dissipating, according to Ms Sedgwick, adding: “We deal with customers who have an improving credit rating. There is a wealth of information available to use now than in the past, which helps us to better assess borrowers’ ability to repay a loan.
“People experience financial issues at some stage in their lives, but it does not necessarily mean that these problems should be a permanent barrier for them.”
Following its 2016 launch through selected networks, packagers and mortgage brokers, the lender introduced a specialist residential mortgage range which includes a two and five-year fixes from 3.29 per cent and 3.79 per cent respectively.
However, one of its more standout propositions is the range loans unveiled during the pre-launch lending pilot. Called Buy Together, the suite of residential mortgages enables up to four applicants to purchase a home together, with rates starting from from 2.99 per cent variable to 70 per cent LTV or 3.29 per cent for a fix.
She said: “It is a great proposition and it fits in with our usual residential criteria. It is for those who are unable to purchase a property in their own right or are unable to raise a big enough deposit by themselves.
“To my knowledge, there is only one other lender that offers a similar proposition. The products have attracted a lot of attention from families, where the parents want to help their children to get on the property ladder, and from groups of friends.”
Vida is also among a growing number of smaller banks, building society and specialist lenders servicing landlords who would not meet the criteria of mainstream lenders.
These include loans for older and retired landlords, ex-pats investing in the UK as well as limited company products that stipulate a minimum of one year’s accounts.
A school of thought predicts a surge in demand for the latter proposition as many wealthier landlords are likely to seek to minimise the impact of the pending cuts to mortgage interest tax relief to 20 per cent by April 2020. Limited companies are not affected by the changes.
Ms Sedgwick said: “There are implications for transferring a personally held property into a company. It would involve a physical sale of a property so stamp duty would apply to properties over a certain value.
“A lot of property is likely to come onto the market because of the tax relief changes, which would help to kick-start the first-time buyer market. This is a good thing for those who are struggling to purchase a property. However, rents will also go up in the interim.”
Vida aims to unscrew a few more nuts from the training wheels this year by further broadening its distribution and dipping its toe to the burgeoning second charge market, with a product range touted for the middle of the year.
Myron Jobson is a features writer at Financial Adviser
LOUISA SEDGWICK'S CAREER LADDER
August 2016-present
Director of sales - mortgages
Vida Homeloans
April 2014 – July 2016
Head of intermediary distribution
Leeds Building Society
May 2011 – April 2014
Role director
Louisa Sedgwick – Interim management
1992 – April 2011
Variety of roles within retail (Bradford& Bingley) and intermediary (Mortgage Express). Finishing as Head of 3rd Party Management (UKAR).
