Tailoring deals to fit needs

After quitting Purely Mortgages, Mark Chilton says he plans to offer more bespoke deals with Homeowner MortgagesMark Chilton, chief executive of new lender Homeowners Mortgages, has set his sights on the UK prime market, using technology and aggressive len-ding to sell less formulaic, bespoke prime mortgages.

In a surprise move last week, Chilton quit Purely Mortgages – the firm he himself founded in 2004 – to become the new chief executive of the Network Data-owned lender.

It’s been an eventful three years for Chilton at Purely. The brokerage was set up as a telephone-based fees-free operation, working along the same model as London & Country.

Then in 2005 Purely made a public U-turn to become fee-charging. A rumoured salary freeze in the summer of 2005 resulted in two of the founding directors, Colin Bell and Ian Giles, leaving and last summer the firm was reported to have shed 19 of its 45 sales staff.

But there was some positive news last week with the announcement that Purely had signed a deal with ITV to produce an online mortgage service with virtual deals.

Despite the future looking up for Purely, Chilton says he felt it was “the right time to rejoin the lending market”, having previously spent almost a decade at First Mortgage as chief executive.

He says: “Homeowners Mortgages aims to be a whole of market lender. We wont get there in one shot but that is our aim. We will pull niches from several areas to start that process and get some margins.”

His ambitions for Homeowners goes well beyond the lender becoming one of the many me-too-type sub-prime operations currently cluttering the specialist market.

In a counter-move to the prime lenders dipping cautious toes into the sub-prime water, his ultimate aim is to make inroads into the prime market. His reasoning is that the future for prime will eventually be rosy.

He says: “Simply put, the UK lending market is running out of back book. The reality is in the short term, new and existing business is disappearing. It’s inevitable – within the next few years, margins will have to return in mainstream lending.

“Presently, the prime market in the UK is largely under water so we will be naturally going for the sub-prime market to begin with. Then there will be a point at which the margins available from prime will start to be attractive, and when that happens we plan to be there.”

Chilton made a name for himself as a technological innovator when he helped develop Net Mortgage, Savills Private Finance’s online proposition.

Richard Griffiths, chief executive of Network Data Holdings, of which Homeowners is the lending subsidiary, says: “I have known Mark since the 1980s and know how respected he is in the industry.

“I did business with him during the dotcom boom and realise he has a good technological appreciation, which is one of the most important things in today’s mortgage market.”

And still with an eye on technology, Chilton believes that the future for Homeowners lies in the use of automated calculations, but coupled with underwriting.

He says: “I have always been a great fan of combining technology and the personal touch.”

“I think success in the future will come from not being afraid to examine sectors where people need individual underwriting.

He adds: “We are seeing this to a certain extent in risk-based pricing and credit scoring. Soon, online scoring will get a lot more sophisticated and you will see people exploiting different places on the price credit risk curve, effectively creating bespoke products and rates.

“The driving function of the market is going to be solutions for affordability. BM Solutions did it when it brought in high fee, low rate products. You also have First National doing 100% mortgages for prime with aggressive affordability calculations, all individually underwritten, not formulaically calculated. Great products like that are fulfilling a genuine need.

Chilton adds: “I’m not saying that is the path we are taking but that is where my heart leads me. We will capitalise on as much of the technology that’s out there at the moment as we can. Also, the possibility of doing instant mortgages like edeus but not charging a premium is enticing.

Chilton is and has been an outspoken critic of many aspects of the mortgage industry. When Purely was operating on a fees-free model he hit out at brokers charging high fees.

A source told Mortgage Strategy: “Chilton was criticising brokers, and was said to have been calling them “Ferrari Kings” for charging high fees. Then he promptly did a U-turn by starting to charge fees with Purely. Does he really think the intermediary community has such a short memory?”

Others in the market take a more pragmatic view. Mark Harris, managing director of Savills Private Finance, where Chilton worked until 2002, thinks the transformation into a lender will fix any relationships damaged by Chilton’s past criticisms.

He says: “This move is not a surprise. It seems Chilton has gone full circle in the mortgage industry. He knows his stuff and has a great technological background. Griffiths has made a good choice in appointing him.”

When it comes to the subject of his own merits, Chilton says: “I think I am naturally aligned to being a lender – I’m an accountant by trade.

“I pretty quickly decided to go with Griffiths because I looked at the various lender start-ups and one of the critical factors is having a distributor relationship in place.

He adds: “We need to strengthen our distribution independently of Network Data. We will help each other grow rather than be reliant on each other.”