Britannic Money, best known as one of the pioneers of current account mortgages, has been in the news recently as the first lender to launch a sub-prime product with Cam features.
At the start of this month, the Britannic Money Restart homeloan, with the brand name Fresh, was unveiled, offering overpayments, underpayments, payment holidays, daily interest, tracker rates and, after a year, a current account option for borrowers with impaired credit.
Although many intermediaries welcome the product as it gives them another option to offer the growing number of borrowers who do not fit mainstream criteria, it has led to criticism from some.
Some fear that giving borrowers with poor credit histories the flexibility of a Cam is an invitation to get into debt.
One industry source has labelled it a “PR product” introduced as part of a “lazy marketing strategy” to generate new interest in Britannic but unlikely to make a big impact on the market, partly because its rates are not the most competitive.
But Britannic head of business development Bob Perks, who joined the firm in June from Bristol & West, points to the cautious roll-out of the product.
He concedes there could be potential problems in giving borrowers with a poor credit history such freedom but emphasises that safeguards have been put in place.
Perks says: “We offer counselling for the first six months that a borrower takes the loan and they will get a phone call every month. About 60 per cent of our staff have been recruited from the sub-prime market. We have taken on four new underwri-ters and will look to recruit more people.”
He denies it is a marketing or PR product, saying Britannic is looking at doing substantial volumes of business once the launch period settles down and he expects it to form 30 to 40 per cent of its overall business within a year.
As part of its “safe” launch, Britannic only made Fresh available through three packagers with experience in the sub-prime market – All Types of Mortgages, National Guarantee and Solent.
But Perks has been on the road looking to sign up several more packagers over the next few weeks to boost sales and has had talks with Pink Home Loans and other big players such as The Mortgage Operation are on its radar.
He claims Britannic differs from other high-street lenders which have targeted the sub-prime market.
Perks says: “I do not believe that any high-street lender has launched properly into the sub-prime market. They have wanted to do the nice end of the market, not all of it.”
He is adamant that Britannic is not out to position itself purely as a sub-prime lender and will continue to offer a range of products, including mainstream, buy to let and Cam.
After the time and resources spent on launching Fresh, Perks says Britannic will not move into any new areas over the next two to three months but in the longer term is considering its options, including “seriously looking” at equity release.
He says Britannic intends to remain committed to the intermediary market, which accounts for about 80 per cent of its business. The remaining 20 per cent is direct and Perks predicts that this may swing in the favour of brokers in the future.
The lender's big focus at the moment is next year's business plan and one of the key issues on the agenda is how to build long-term relationships with customers and intermediaries in what is a relatively fickle market.
Perks says: “Intermed-iaries are squeezed, with endowment sales down, so they are looking to do more mortgage business and we want to reward intermediaries in the longer term. Constant churning is not good for anyone.”
One innovation to the mortgage sector that Britannic is considering for next year is paying ongoing or renewal commission to intermediaries rather than just an up-front payment that does not take customer service into account.
Perks ends on a confident note about Britannic Money's future despite the recent uncertainty surrounding its parent, Britannic Group.
The group lost chief executive Danny O'Neil at the start of the year and then it announced it was up for sale before taking itself off the market when its six-month results were issued in July.
Perks says: “This is not affecting our trading at the moment. The life industry has had a difficult time but the mortgage business is customer-hungry.”
When questioned whether Britannic Money would consider leaving the group to become an independent mortgage lender, he will only say that is “an interesting piece of speculation”.