First Active Financial chief executive Tony Ward sees the company's takeover by the Britannic group as coming at just the right time for his plans for growth.
Having won a string of awards and steadily increased its market share, First Active would not have been able to make the fullest use of its successful business model without the backing of a big player.
Ward is delighted with First Active's new parent, which acquired a 60 per cent stake in the company last October for £57.2m.
First Active will be reb randed as Britannic Money early next month to share the group stable with Britannic Asset Management, Britannic Assurance and Britannic Ret irement Solutions.
Ward says: “As a management team, we wanted to do more. We had been doing innovative things and had earned a good reputation. The only way to unlock the value of the company was through substantial investment.”
One of the more innovative mortgage lenders, First Act ive, was the first to offer a current account mortgage.
Ward says: “Before offering the current account mortgage, we were one of the first to offer a flexible mortgage, at the end of 1995. We were also the first to offer flexible features on a buy-to-let mortgage.”
It was this success in its niche that attracted Britannic. What was a niche product is quickly becoming core business, with flexible mortgages predicted to account for 55.5 per cent of all mortgages by 2005. Last year's turnover has yet to be announced but turn over for 1999 was £535m compared with £300m in 1998.
Ward says he is pleased that Britannic has bought First Active for what it is and not for short-term gain.
The management of First Active does not have to offer Britannic products to its customers. Ward feels this res pect for the consumer is key to maintaining First Active's competitive edge when it bec omes Britannic Money.
He says: “Britannic inv ested in this business because they liked it, not because they wanted to change it. We started with flexible mortgages as a niche product. That niche is now becoming mainstream.
“There are over 40 flexible mortgages on the market but most of them are not really that flexible. Ours is a good product offering good service. You can access acc ount information online to check balances and we have got more developments to come online. It is a Rolls-Royce product without any hidden catches.”
The average First Active loan size is £85,000. Using the flexibility of the mortgage, 49 per cent of customers make overpayments each month on top of their standard monthly payments. The average additional payment is £63 a month.
The company currently has more than 30,000 mortgage customers and half of those have flexible mortgage accounts.
Ward says: “The big challenge for lenders is to keep customers. Some competitors have told me I must be mad to help customers pay off early but we find that those who pre-pay stay with us longer than those who don't.
“There are too many len ders chasing too little business. Lenders are trying to compete on price or pay high fees or offer credit. Our product has no gimmick to catch the client. It is a very fair product.”
The company started in 1986 as Mortgage Trust. In 1996, it bought the Mortgage Corporation, after which it became First Active.
Ward was managing director when the brand name First Active was launched. So, how does he feel about losing a new-media-style name and replacing it with something more traditional in tone?
Ward says: “I think it is important to have the Brit annic Group brand name. Brit annic Money is a good description of what we do. We have considered the move carefully. Egg got in early with an abstract name and a lot of people thought it would not work but it has stuck.
“We are not a start-up company. With the second wave of businesses with internet in their strategy, a lot of established names are coming back as customers see them as more trusted and stable.”
Until the start of 1998, First Active derived 100 per cent of its business through intermediaries. Now they deliver 85 per cent of the company's clients although Ward sees IFAs as key to the company's growth.
He says: “In early 1998, Virgin started offering their competing product direct, so the company had to respond to that. But the intermediary market is where we come from and where we want to stay.”