With the likes of Coventry launching Godiva Mortgages last week and Scarborough unveiling Scarborough Specialist Mortgages, Mehrdad Yousefi, head of intermediary mortgages at A&L, believes more will follow.
He says: “Coventry’s recent launch shows that forward-thinking societies are looking at launching subsidiary lenders.”
He adds: “Societies are catching up with banks. Launching a subsidiary is a natural way for them to diversify.”
Colin Franklin, managing director at Godiva, says the reason behind the subsidiary’s launch was to expand Coventry’s sub-prime business.
He says the society was unable to do this before because of the Building Societies Act’s restrictive funding allowances.
Franklin says: “Through Godiva, we will have the opportunity to securitise. This will enable us to secure additional funding and change our risk profile. It will also give us scope to extend our range of products and focus on the needs of intermediaries and their clients.”
However, not all societies think the same way. Chelsea says it doesn’t see the benefits of launching a subsidiary lender.
A spokesman for the society says that the cost of brand advertising as well competition in the sector has put it off.
He says: “We have discussed setting up a subsidiary in the past but decided that we are happy to trade under our own name.
“If we’re lending Chelsea’s money, we will do it under the Chelsea name.”