Heritable Bank may not be one one of the best-known names in the mortgage market but it certainly has big plans, with advisers at the core.
It increased its completions last year by 20 per cent to £200m after writing £165m of business in 2005 and the company is hoping to double that figure this year to £400m. Heritable was founded in 1877 and became a wholly-owned subsidiary of Icelandic bank Landsbanki in 2003.
It hopes that growth will be achieved by expanding beyond its current limited distribution strategy so any mortgage broker or adviser can use its products rather than the current select few.
Chief executive Mark Sismey-Durrant says: “We have completed just over £200m of new business. We started in 2003 so we only really got going in 2004. The first year of good profit was 2005 and 2006 was the first real milestone in terms of writing good levels of business and during last year we recruited more staff and took on more premises.
“If we are writing good quality business, we have a shareholder that is as keen for us to grow so there is no capacity limit but it is important to work in the right way. We would be looking to more than double the £200m figure in 2007. We offer a personal service quickly and the credit quality of the book is excellent at a time when repossessions are up.”
Heritable, which is funded by deposits, although it has a securitisation option, currently only deals with individual advisers within bigger brokerages but wants to overhaul that strategy to build relationships with the firms themselves.
It has increased staffing of the mortgage team over the past year to be able to cope with enquiries from more brokers.
Sismey-Durrant says: “The approach to the business has been guarded to make sure we delivered the service that our brokers expected so we have very good relationships with some people. We want to broaden distribution to develop relationships with brokers and work at a higher level at some of the brokerages.
“Our current distribution is personal so we have 350 introducers signed up to us and they are all individuals within bigger organisations. We find someone who is the top producer in one place and we build a strong relationship with them, we do not deal with the companies themselves.
“But we can support more relationships. We have been quite protective of service but as we have increased the headcount we can take on more volume. We are open to everyone – any broker. We vet people who want to introduce business but that is to make sure they are properly authorised.”
The firm will also look to work more closely with packagers. Sismey-Durrant says: “We do not particularly deal with packagers at the moment but we want to do more.”
The firm’s portfolio includes buy to let, self-cert, short-term lending (similar to bridging finance), semi-commercial and non-status mortgages. That pool of products added up to £430m in mortgage balances by the end of last year but represents a small percentage of Landsbanki’s total business as it controls over £4.8bn of deposits.
Heritable had a challenging year in 2006 despite the increase in business. Sismey-Durrant says: “One of the issues last year was that market niches were under threat from competitors and the challenge for us is to find new ways to reach new markets. We do not always do the mortgage in the way that most people do, like short term finance. That is not just a bridging loan, as sometimes people are looking to own a home for a short time as part of a bridging structure. We would like to do more short-term lending.
“The number of entrants into the specialist market has increased so the question has to be asked is whether they are genuine specialists or doing specialist lending in a general way so there is a commoditisation of some of the things in the market, which is inevitable.”
Another way that Heritable plans to build business is by expanding geographically. It is still a predominantly London and South-east lender but feels the time is right to widen its reach. For example, it has no business development directors in the North but wants to begin recruiting in that region.
Sismey-Durrant says: “There are parts of the market geographically that do not know about us. We want more underwriters as we handle very complicated business. We have about 22 people in the mortgage business and we would like to add another two or three BDMs to get access to other parts of the country we are not in at the moment.
“We are quite London and South-east-focused but we have now recruited someone for the Midlands. We are still looking to strengthen presence in London as it is a big market and we are good at it and are used to doing high-value properties. That is our meat and drink. We feel that what we do is well understood by people who have tried it but it has not been tried by enough people.”