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Motoring into the mortgage majors

GMAC Residential Funding executive chairman Stephen Knight says the lender has its sights on achieving top 10 status in the UK and is confident it can make it without a high-street presence.

Head of marketing Jeff Knight says such the top 10 is well within the powers of the firm and refutes reports of a move into the high street.

GMAC-RFC, a division of US giant General Motors, is now ranked as the 12th-biggest lender in the UK, according to the Council of Mortgage Lenders&#39 2003 ranking released in September. GMAC-RFC relies on the intermediary market to sell its range of products and the CML estimates that 60 per cent of mortgages are sold through intermediaries.

Jeff Knight believes that even if the number of mortgage intermediaries shrinks after M-Day because of the regulatory burden, the amount of business being placed will not fall away.

GMAC-RFC continues to woo brokers with its internet-based business. Park Row Independent Mortgages IFA Kevin Paterson says: “It is a broker-friendly company. We have been very impressed by its point-ofsale technology. As long as they continue with this and its competitive rates, there is no reason why it should not succeed.”

Jeff Knight says: “Our first goal is to become one of the top 10 lenders in the UK. We do not just compete on price. In a very competitive market and we are a creator and trade of mortgage strategies. Our business model works for us.”

It uses US-style funding techniques. Head of product development Peter Simpson says it does not take on assets and keep them on a balance sheet. With a fluid mix of securitising, managing and trading assets, it is constantly releasing capital. He says: “Essentially, some UK lenders are limited by their balance sheets.”

Lenders such as HBOS and Northern Rock have big balance sheets, forcing them in 2003 and 2002 to securitise assets to release capital.

GMAC advanced £4.8bn in mortgage loans in 2003. The mortgage market grew by 36 per cent on the previous year while GMAC-RFC grew by 48 per cent in 2003, boosting its market share and rising one place in the CML&#39s ranking. The firm entered the UK market in 1998 and Jeff Knight says the success of the company is due to the broad range of mortgage products on offer to intermediaries and the online proposition. It has 19,000 IFAs and brokers on its database and a third of business is done online.

Looking at the rankings, GMAC-RFC is close to top 10 status. Bristol & West is 11th in the CML&#39s table and lent £5.2bn in 2003. The highest-ranking mortgage lender in 2003 was HBOS, lending £70.3bn, 26 per cent share of the UK mortgage market.

Jeff Knight thinks the rise of GMAC-RFC could come by default. He says: “We will get through as there will be some more consolidation in the market after M-Day. After all, we nearly saw an HBOS-Abbey merger.”

There is certainly scope in the market for other American and European entrants and cross-border alliances. Santander Central Bank in Spain has seen off the competition from HBOS for Abbey. I-group, which specialises in sub-prime mortgages, is another player in the UK market with an American parent. It was acquired, along with its subsidiary businesses in June 2001 by GE Consumer Finance, a unit of the General Electric Company.

GECF chief commercial officer says following the relaunch of its GEM mortgage range in March, there has been a lot of positive feedback from intermediaries and introducers. Over 40 per cent of new applications received in April were for products in its its new range.

I-group sales director Jonathan Sadler says “Our aim is to remain highly competitive in a very large marketplace. We have an unswerving commitment to the IFA sector.”

Another prospective American player is Countrywide with its relationship with Barclays through the Woolwich and Cheltenham & Gloucester. Purely Mortgages chief executive Mark Chilton says Countrywide may even be in a position to counter-bid against Santander Bank for Abbey. However, Barclays slipped in the CML&#39s ranking from third to fifth place, with £18.3bn lending in 2003.

IFA Charles Bennet says GMAC-RFC has come a long way in a short time. He says: “Assuming that the statement that 60 per cent of mortgages are sold through intermediaries is correct, GMAC will continue to do well. As a mortgage provider it is in tune with brokers&#39 requirements.”

Chase de Vere managing director Simon Tyler says: “GMAC is a very good innovator. It did an excellent job by buying a packager and a lender, capturing two parts of the market. However, the current big players in the top ten will not be threatened. Remember, competition is not necessarily a threat.”

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