The two industry stalwarts behind New Street Mortgages say its investment in intelligent credit profiling sets the new buy-to-let lender apart from the opposition
Given the rush of new buy-to-let lenders in the past two years and a Chancellor apparently hell-bent on restraining the sector, one might expect to find New Street Mortgages’ David Finlay and Adrian Whittaker in sombre mood. But the new lender’s directors refuse to allow either stiff competition or punishing tax rises for landlords dampen their spirits and are more than up for the challenge ahead.
Six months on from the brand’s launch, Mortgage Strategy has caught up with its salesand distribution directors in their London office to discuss the plans of the buy-to-let market’s most disruptive lender.
New Street Mortgages launched in February as a broker-only buy-to-let brand of the Northview Group, backed by private equity firms TPG and Blackstone.
In an effort to stand out in the crowded buy-to-let sector, New Street set out its stall as a smart, fast-acting, tech-savvy lender with the ability to outpace its rivals.
Six months in, how do the two directors feel about the brand’s progress? “I’m really pleased with where we are at this moment,” says Finlay.
“I think the brand traction and the noise that’s been made around New Street coming to market have been absolutely fantastic. Our distribution partners have taken us to their hearts and worked with us to really make something of New Street.
“Am I satisfied? No. But am I ever satisfied? No. I’d love it to have greater traction than it currently has. I’d love to be doing even more business than we’re doing, although the business we’re doing now is exactly where we want to be.”
Whittaker echoes this sentiment. “I’ve been delighted with the feedback from brokers and distributors alike,” he says.
“We know there have been a number of new entrants over the past 12 months or so but, when we speak to distributors, the feedback generally is that there’s real substance behind our proposition, it’s well thought through and it brings some added value to their business.”
New Street employs state-of-the-art analytics, rather than a standard credit score, to better understand borrower credit risk.
Whittaker and Finlay say the technology, which has its roots in the software developed by Acenden to manage backbooks, gives them an advantage over all their rivals and lets them develop more innovative products.
Indeed, the pair hope New Street has been able to take a case from application to offer stage in five days.
“The proposition is all based around intelligent analytical credit profiling, which means for non-complex cases it gives us a significant edge,” says Whittaker.
“We’re able to deliver better, more sustainable borrower outcomes. That’s appreciated by the brokers. As a result, we’re seeing significant volumes of business coming in and real demand for our services. People are knocking on the door.”
The lender’s ‘geo-advance’ range reflects its proposition. It takes advantage of New Street’s data-crunching facility to offer mortgages with varying rental calculations depending on where a property is located.
The lender also gives preferential rates for borrowers with annual incomes of more than £100,000 and landlords with high-yielding properties, again dependent on location.
“Not many lenders out there have taken a really regionalised approach to the buy-to-let market,” says Finlay. “What we’ve done is to say:‘Different areas require different approaches.’
Our analytics mean we can look at that, and we’ve come up with geo-advances.”
Whittaker says brokers like New Street’s ability to make automated decisions, as well as its online transparency about case progression and its good communication with underwriters, where necessary.
Investment in technology may be paying dividends now but the firm has solid competition. The buy-to-let arena has no shortage of lenders and will see several more launch this year, including Vida Homeloans, led by industry veterans David Tweedy, as chief executive, and Guy Batchelor, as sales director.
Are Finlay and Whittaker worried about the rest of the market catching up?
“What do they say? ‘Imitation is the greatest form of flattery’,” says Whittaker.
“As we continue to innovate and look at different things, the market will continue to look at us, and I’d be naive to think that we would have that segment to ourselves forever.”
He adds: “Others will follow suit at some point but we don’t intend to rest on our laurels. We intend to look at developing further products and propositions that are slightly innovative and bringing them to market when we think it’s appropriate.”
Finlay says the lender cannot reveal the details of some of its planned products but they will be targeted at genuine consumer demands.
“When we get to looking at innovation and innovative products, I doubt it will be instant launch, instant traction, instant success,” he says. “There’s no point in coming out with a product that’s really innovative but nobody wants. It has to be able to fulfil and deliver to meet customer needs.”
Whittaker says New Street’s technology will help it continue to develop products to suit different customers.
“The credit analytics give us real opportunities to provide innovation in terms of serving market sectors,” he says. “We assess borrower profiles against market sectors and can identify opportunities within that. That allows us to be innovative in those markets. We’ve shown that already in terms of our buy-to-let proposition.”
But the lender also plans to expand beyond buy-to-let. Whittaker says it wants to launch into residential mortgages in the autumn and will start with new-build. Again, the lender hopes its technology investment will give it differentiation.
“The proposition is absolutely suited for new-build,” says Whittaker. “Speed to offer, transparency, automated decisions, quick, modern mortgages – it’s what the new-build market has been crying out for. We know from discussions with brokers that they’re really excited about us coming into that market.”
Finlay goes further, saying the lender’s speed to offer will enable it to outgun its rivals – for now, at least.
“For anybody looking to purchase and needing that quick decision, why would you look beyond New Street?” he says.
“We would certainly give that speed to offer. I think competitors will probably find it difficult to compete at this point.”
The lender will move beyond new-build to other areas of residential when it feels the time is right, according to Finlay.
He says: “I think the proposition, because it’s transparent and quick, with certainty of decision, will align itself to certain customer segments. So we will look at those segments and ask where the distributors are that work on those areas, which we can work with to get good, honest feedback about what we’re good at and what we need to continue to improve.”
In terms of its distribution base, New Street is keen to expand the range of brokers with access to its products.
Finlay adds: “We took a deliberate commercial decision that we would work with the networks first to better control the volumes that we were getting in. The plan was always to work across the whole of the intermediary market. So the rest of the networks and clubs we will be bringing on by late summer, early autumn.”
The lender would also welcome more feedback from brokers. Finlay says New Street consulted them before its launch and wants those discussions to continue.
“When we launched the pilot we wanted to engage brokers fully and understand not just what we believed the proposition should be and what the experience should be but what it was like for the broker at the end,” he says.
“When you launch a new lender, there will always be a couple of bumps in the runway. So we went away and then came back to them, and they were really happy with how quickly we responded. I’m all for open and honest feedback from brokers.”
The buy-to-let market is going through considerable change. With stamp duty tax hikes, mortgage interest relief cuts and tougher proposed underwriting standards, the Government is not making life easy for this part of the mortgage market.
But Finlay is optimistic about the sector’s future and says many others are too.
“I’ve had really interesting conversations with industry leaders and heavyweights in that space and there’s a consensus out there that the recent changes, particularly around stamp duty, may have had an initial impact but, ultimately, landlords will absorb them. I think we will see a focus on limited company buy-to-let.”
New Street has not experienced the widely reported slump in buy-to-let business since the stamp duty deadline rush.
“A lot of brokers were expecting that downturn,” says Finlay. “But they’re all reasonably positive that the market will come back.”
Whittaker agrees. “Most distributors we speak to have already seen the market bouncing back to levels before the stamp duty rush.
“I think there will be a demand for high-yielding properties, so you may see a bit of movement towards HMOs. But ultimately, returns over the long term on buy-to-let seem to outstrip anything you’d get from traditional savings, equities and the like.
So there’s every reason for investors to still be involved in the buy-to-let market.”
On the subject of investors, what will happen to New Street, and its parent, when their private equity backers want their money back?
“Our parents have been very supportive to date,” says Finlay. “But they are a private equity house. At some stage they will be looking to this business to return them their investment and make a commercial decision off the back of that, whether that is to sell it on, IPO, whatever. But at the moment they’re focused on helping us bring New Street to market and grow it, and also on what happens with Kensington and Acenden.”
Finlay adds that a decision is still some way off and the firm’s private equity backers have not set an end date.
“It’s not been discussed,” he says. “We have a commercial plan in place and we’ve been looking at that over a three- to five-year spectrum. But that’s no different from a normal business plan. So there is no date in mind.”
New Street is still a very young brand but its founders have big dreams. With the lender poised to launch into residential mortgages and with its ambitious distribution plans, Finlay and Whittaker’s unquenchable enthusiasm will be an important part of the firm’s growth.
Adrian Whittaker – CV
2015–16: Sales and distribution director,
New Street Mortgages
2013–15: Corporate sales director, Myhomemove
2011–13: Non-executive director, Mortgage Brain
2008–13: Director of key accounts, intermediary distribution, Santander for Intermediaries
HOBBIES Gig rowing
FAVOURITE FILM Blade Runner
FAVOURITE BAND Used to be a big punk, into the Clash and The Jam
MOST SIGNIFICANT PROFESSIONAL ACHIEVEMENT Launching New Street Mortgages
David Finlay – CV
2015–16: Distribution director, Northview Group
2012–14: Barclays UK managing director, intermediary channel, retail and business bank
2000–10: Intermediary channel director, Barclays Bank
HOBBIES Theatre, opera
FAVOURITE FILM Jungle Book
FAVOURITE BAND Currently listening to a lot of The Proclaimers
MOST SIGNIFICANT PROFESSIONAL ACHIEVEMENT Launching New Street Mortgages