Fleet Mortgages launches first full product range funded by Starling Bank

Fleet Mortgages, the buy-to-let specialist lender, has today launched its first full buy-to-let product range funded by its new parent, Starling Bank.

Covering its three core areas of lending – standard, limited company/LLP, and HMO/multi-unit block – the new range has price reductions across the board, with rates starting from 2.59% and rental calculations from 125% at 2.99%.

Product highlights include:

  • Standard – two-year fixes at 2.59% (65% LTV) and 2.69% (75% LTV); five-year fixes at 2.99% (65% LTV) and 3.09% (75% LTV); and trackers at 3.09% (65% LTV) and 3.19% (75% LTV).
  • Limited company/LLP – two-year fixes at 2.79% (65% LTV) and 2.89% (75% LTV); five-year fixes at 2.99% (65% LTV) and 3.09% (75% LTV); and trackers at 3.09% (65% LTV) and 3.19% (75% LTV).
  • HMO/MUB – two-year fixes at 3.09% (65% LTV) and 3.19% (75% LTV); five-year fixes at 3.35% (65% LTV) and 3.44% (75% LTV); and trackers at 3.39% (65% LTV) and 3.49% (75% LTV).

All five-year fixes are payrate products with a rental calculation of 125% at the pay rate, while the trackers are lifetime products tracking thing the Bank of England Base Rate with no ERCs.

Standard and limited company/LLP products come with either free or discounted valuations.

Fleet is currently assessing documents within 24 hours, conducting same-day DIP reviews and providing valuation turnarounds within 24 hours.

Steve Cox, Chief Commercial Officer at Fleet Mortgages, commented: “This is an exciting day for Fleet Mortgages as we launch our first new product range fully funded by Starling Bank. At the time of the acquisition, we outlined how this new partnership would allow Fleet to offer highly-competitive products and this new range is the first fruits of this partnership. We have been able to cut prices across the entire range and believe these products will appeal to advisers and their landlord clients, whether seeking to purchase or refinance. Coupled with our commitment to service excellence and our experience in the buy-to-let market, we believe there are a large number of compelling reasons to use Fleet and would urge advisers to contact their regular business development contacts to see how we can support them.”

In a ‘wildly imbalanced recovery’ – credit access must reflect consumers’ circumstances

The UK economy is evolving rapidly as the UK adapts to what the Institute for Fiscal Studies (IFS) recently noted is a ‘sharp – but incomplete and wildly imbalanced – recovery.’ It is a reality that has significant implications for all businesses because, as the IFS has noted, the future isn’t going to be what it used to be. What we buy and how we buy it is changing. Car retailing and access to credit are both changing as MotoNovo Finance Managing Director Karl Werner observes both must adapt; “The post-lockdown environment sees many of the changes in patterns of household spending and working now persisting. In an emerging ‘new normal’, only a rate-for-risk pricing model for credit can truly provide an agile and tailored pricing approach for consumers.”

The pandemic saw mixed signals for peoples’ finances; record levels of consumer saving with high levels of financial uncertainty. Now, the economy sees rising employment, with many people in new jobs, alongside increasing inflation. It is a dynamic credit risk landscape that is a long way from maturity. To all of these levers is the increasing regulatory focus on delivering good customer outcomes, with a new Consumer Duty scheduled for next year.

One of the joys of risk-based pricing is its fluid nature; everything is personalised to the customers. The model can adapt to the highly creditworthy and, as MotoNovo is demonstrating to the needs of people whose financial circumstances are improving as the economy improves in what remains, according to the IFS, ‘a period of acute structural change.’

Reflecting upon the trends and future for dealer finance, Karl reflects; “Yes, a fixed rate model can also deliver acceptances across all areas of the credit curve, but its aggregated nature means inevitably that the most creditworthy would subsidise other borrowers. As our evidence continues to demonstrate, many such people are not choosing a dealer finance acceptance at what they see as an unnecessarily high interest rate. Dealer finance must adapt to reflect the risk curve, which is arguably more divergent than ever before.”

Risilience, a new company that commercialises research from the Centre for Risk Studies at Cambridge Judge Business School, is launched with a £6 million Series A investment.

University of Cambridge Judge Business School and a group of international investors today (21 October) announced the launch of Risilience, a new commercial company offering a platform applying the research frameworks and approaches of the Centre for Risk Studies at the Business School.

The Risilience team.
The Risilience team

Risilience and its SaaS (software as a service) platform were launched with Series A funding of £6.05 million from investors including lead investor IQ Capital, insurance multinational Tokio Marine, and US MIT alumni investment fund Castor Ventures.

The company’s products include a platform to help firms transition to a low-carbon economy, so the launch just before the COP26 climate-change conference in Glasgow is very timely.

Professor Daniel Ralph, Chairman of Risilience and Academic Director at the Cambridge Centre for Risk Studies (CCRS), said: “For several years, companies have asked us to make it easier for them to utilise the outputs of research developed at the CCRS. Risilience provides an analytical platform for a business to apply the research to quantify and manage its risk.”

Risilience, formally known as Cantab Risk Research Ltd, has been working for several years with a number of leading corporates developing applications of management science for their risk operations. It will now market the Risilience platform as a solution for companies to model their digital twin to turn their risk to strategic advantage.

One of the greatest challenges facing companies today is the transformation of business to be sustainable against climate change and the pressures caused by adaptation of society to reduce carbon emissions.

Risilience has developed a comprehensive framework for TCFD (Task Force on Climate-Related Financial Disclosures) reporting and for implementing a company’s net sero plan. Climate Risilience is a major application of the Risilience platform, drawing on detailed scenarios and analytics of physical and transition risk affecting companies. The client base of Risilience has collectively pledged to remove an annual 240 million tonnes of carbon emissions – the equivalent of the annual carbon emissions produced by Spain.

The founders of Risilience, Dr Andrew Coburn, CEO; Professor Danny Ralph, Chairman; Dr Michelle Tuveson, Chief Client Officer; and Simon Ruffle, Chief Product Officer, combine many years of experience of commercial risk modeling with academic leadership in business studies for risk management.

Monthly government property transactions: Residential transactions will dip further next month and beyond, says RSM

‘As expected, there was a significant increase in property transactions in September rising by 67% from the levels in August as people rushed to take advantage of the stamp duty holiday on transactions below £250,000 before the relief was phased out by the end of September.

‘There were just under 40,000 less transactions in September when compared to June reflecting the tapering of the relief. Transaction volumes in the month of September were still 67% higher than pre-pandemic levels showing that the incentive being offered by government was driving behaviours.

‘There was a 25% drop in property transactions in Q3 when compare to Q2 of this year as the average house price in the UK is above the taper threshold of £250,000 for the stamp duty holiday. However, the number of transactions for the quarter are still 13% higher than the same quarter in 2019 and 34% higher than the same quarter in 2020 when the government support was first introduced.

‘It is expected that we will see a similar fall in transactions in October as was seen in July as the withdrawal of the relief and the impact of furlough being removed plays through the economy. Other uncertainties such as inflation, future tax changes and potential increases to interest rates is likely to mean that transactions volumes for the rest of the year are somewhat subdued in comparison to the first three quarters of this year.’

Ian Taylor, partner at RSM UK

Fair Finance Partners with 4most to Enhance Risk Assessment and Improve Credit Decision Process for Customers

The UK’s largest risk analytics consultancy, 4most, has partnered with financial services provider, Fair Finance, to deliver a more automated approach to decisioning and improve decision quality by expanding its lending activity. 4most has been working closely with the risk team at Fair Finance to create a series of initiatives designed to improve the customer journey and boost several aspects of the risk assessment and credit decision process.

Torgunn Ringsjø, Director of Products and Recurring Services at 4most commented: “Improving the financial wellbeing of its customers is at the core of Fair Finance’s strategy. Previously, most decisions were manual, relying heavily on the experience of the underwriting team. Whilst this approach can work well in a branch environment, a common challenge is the ability to scale this model as the organisation moves online and deals with exponential application volumes. The need to automate decisions, whilst building on Fair Finance’s underwriting know how, were key goals identified from the start.”

Using its Knowledge Elicitation Process (KEP), 4most incorporated a combination of expertise from the underwriters at Fair Finance supported by statistical insight from historic data into the model build. The KEP process is designed to ‘elicit’ knowledge from the Fair Finance underwriters and risk team about their own customers. This insight is then used to create a scorecard model that incorporates the characteristics the ‘experts’ believe to be the key drivers of risk for their portfolio.

The data available from the historic Fair Finance applications supported the process in two ways; firstly, by providing real life scenarios for the KEP workshops to produce a model to infer the manual ‘expert decision’ and, secondly, to give insight into historic decisions and subsequent customer behaviour for the purposes of model consistency and validation.

Guillaume Foucaud, Chief Risk Officer for Fair Finance, explained more: “From the outset, the team at 4most understood the challenges we had experienced. We have a small risk team, so 4most took the lead in identifying which data was available and suitable for the model development. The KEP was a big win for us as this allowed our experienced underwriters to input into the development process and create a model which was fit for purpose. It also helped to get buy-in from our underwriters for the automation journey as they were able to see first-hand, how the automated model worked and how it could support them in their day-to-day role. The result is a more automated and also consistent approach to application decisioning.”

With the scorecard now implemented, Fair Finance has already seen benefits across a number of areas, including more structured application of risk appetite, a more automated customer journey, consistency of decisions and greater underwriter efficiency.

Torgunn Ringsjø added: “As with any new scorecard, monitoring is essential. We will therefore be using LUMOS, our model monitoring solution, to provide Fair Finance with a hosted monitoring service, including the production of regular monitoring packs as well as bi-annual workshops to discuss trends in portfolio profile and scorecard performance.”

Vanquis launches new personal loan range to the open market

Vanquis Bank, part of the Provident Financial Group (PFG), has today announced it’s expanding its product offering by introducing a range of new personal loans.

This significant step demonstrates their strategic vision to be a digital first customer led bank, offering a range of tailored financial products for consumers whose needs aren’t well met by high street banks.

The personal loans market is sizeable and represents a large growth opportunity for Vanquis Bank to offer new fixed term lending options, in addition to their credit card offering.

Until now they have only offered loans to existing card customers. From today, loans will be available to the open market through a phased roll out via distribution partners such as Experian and ClearScore.

Loan customers will benefit from a fully digital journey including automated decisioning, onboarding and account management. Vanquis’ skilled customer service team will be available to help should they need extra support with their account.

Loans Director at Vanquis Bank, Liam Deasey, said: “By offering a greater choice of financial products, we can better meet the differing needs of consumers. For some, a loan is more suitable than a credit card and enables them to plan for larger purchases and life events such as home improvements, getting married or to cover an unexpected emergency.”

“We’ll continue to evolve our loans proposition to ensure we’re offering appropriate and competitive products for our customers.”

Sprout Mortgage unveils another innovative tool to automate loan approval process

Sprout Mortgage is strengthening its robust line of automation tools for a fully digital mortgage experience with the release of its third originator-focused mortgage tool. Sprout will unveil iAnalyze, the first non-QM bank statement analyzer tool of its kind, at the annual gathering of the Mortgage Bankers Association in San Diego, CA, October 17-20, 2021. iAnalyze helps mortgage brokers and correspondent lenders receive immediate analysis of a borrower’s qualifying income and is the latest in a series of industry-leading process digitization and AI-based tools from Sprout.

The new iAnalyze tool from Sprout Mortgage, the innovative force in jumbo and non-QM residential lending, analyzes up to two years of bank statements to determine qualifying income in a process that can take less than an hour. iAnalyze digitally consumes bank statements that are easily and securely uploaded. Its proprietary machine learning algorithm reads the bank statements and produces an automated income calculation from the transaction history. It is designed for third-party loan originators to eliminate the tedious and time-consuming process of income analysis required for bank statement-based loans. Bank statement loans have long been a staple of the non-QM market and are designed to help individuals with non-traditional income sources to achieve home ownership for residential or investment purposes.

“Once again, Sprout Mortgage technology is making it easier for mortgage brokers and correspondent lenders to grow their business by helping them meet the needs of their clients with less effort,” said Michael Strauss, Sprout Mortgage Chief Executive Officer.

“iAnalyze is an easy-to-use, secure, AI-driven analysis solution that replaces a process which until now could involve a team of analysts and require a day or more to receive the results,” said Henry Santos, Sprout Chief Information Officer and Executive Vice President.

Growing Suite of Easy-to-Use Solutions for Mortgage Professionals

iAnalyze is the third and newest addition to the growing suite of Sprout technology, part of a line-up of automation tools planned to be released over 12 months. iAnalyze joins two other iconic and innovative tools that Sprout Mortgage provides to fulfill its commitment to deliver speed and simplicity to the home financing business. The first, iQualifi, enables mortgage brokers and bankers to easily determine the most appropriate loan program and to instantly price scenarios for customers. The second, ACORN, is Sprout’s proprietary automated underwriting system (AUS) used to originate Prime Jumbo and non-QM loans with the ease of DU and LP. The full line is designed to streamline loan processes for mortgage brokers and correspondent lenders, helping them fuel the growth in their own business from the burgeoning demand for non-QM financing.

iAnalyze will be unveiled at the annual MBA conference. It is expected to be widely available to the Sprout client network in early November.

Creditspring launches new credit builder product to support millions of near-prime borrowers across UK

Subscription loan provider, Creditspring, launches Step, a new credit builder product that helps members gradually improve their credit score without running the risk of incurring further debt. With new Creditspring research finding that over a quarter (28%) of 18–34-year-olds are unaware of how to improve their credit score, young borrowers are set to benefit from this accessible, easy-to-use solution.

Step, which is the industry’s first credit builder product where the issuer takes on risk through loans borrowed, offers members a small, no-interest loan in exchange for a fixed monthly fee, with an individual’s permission, shares information on members’ borrowing data with credit rating agencies to help people build their credit score in a low-risk way.

The product has been launched in direct response to the rise of ‘questionable’ credit builders in the UK. People are signing up and paying monthly fees to these companies believing it will improve their access to credit, but the ‘credit score’ that these companies help improve is not even one that lenders ever see. They are preying on the confusion around credit scores and are just another example of companies tricking people who are looking for support.

Step is designed to benefit the UK’s 10-14 million near-prime borrowers whose credit files make it harder for them to access mainstream credit products. This forces many to turn to higher cost, short-term alternatives – such as payday lenders or guarantor loans – which often come with extortionate interest rates and hidden fees and charges. In fact, unaffordable credit was the source of a third of all complaints to the Financial Ombudsman Service last year and the most common issue for customers. Difficulty repaying loans can lead to a spiral of debt, and in turn, negatively affect an individual’s credit score, leaving prospective borrowers with even fewer options the next time they need credit.

At present there is confusion and worry around credit scores, particularly among younger generations, with a third (33%) of individuals concerned that the financial impact of COVID-19 has negatively affected their credit score. For these individuals, Step provides no-interest loans, allowing customers to build their credit score to help improve their chances of being accepted for future credit – such as a mortgage – later in life. Members pay a fixed cost of £5 per month, and receive a first advance of £100, followed by a second advance of £200 over a 12-month period, with repayments reported to credit rating agencies.

Neil Kadagathur, Co-Founder and CEO of Creditspring, comments: “Step offers our members an accessible and affordable method of building their credit profile, with no hidden charges to contend with. We want to empower near-prime borrowers with the tools to make more informed financial decisions that contribute to better overall financial health in the long term because we think our job is done when our customers don’t need us anymore. It’s our goal to help our members get better access to mainstream, affordable credit products after using Step to improve their credit profile.”

Credit Kudos launches Open Banking credit score to allow lenders to increase acceptances and reduce defaults

Credit Kudos, the Open Banking credit reference agency, has launched Signal, a highly accurate, explainable Open Banking credit score to help lenders serve more customers, reduce defaults and evidence risk decisions.

Available now, the score enables lenders to move beyond the limitations of traditional credit data, allowing them to accurately score all applicants, not just those with credit history. Signal helps lenders quickly and accurately predict risk using highly relevant and up-to-date financial behaviour data, as well as using machine learning with clear explainability – so lenders can understand the rationale for compliance purposes and the risk profile of their population.

Signal uses a combination of machine learning and Open Banking-gathered transaction data to accurately predict an individual’s likelihood of repayment. The model has been trained on transaction data and loan outcomes, collected for more than six years. It ensures the data is highly accurate and more detailed than what lenders have access to through traditional credit data.

The three key benefits are:

  • Increase acceptances: With a highly accurate understanding of anyone’s financial situation, lenders can reach currently underserved customers. This includes those who have a thin credit file, are new to the country, or who have adverse credit history but are now creditworthy – which Credit Kudos estimates to be around six million.
  • Reduce defaults: Signal leverages Open Banking data and insights to accurately predict someone’s creditworthiness. Using machine learning trained on more than six years of data, lenders can assess people more accurately than with traditional credit scores, which reduces the likelihood of a borrower defaulting.
  • Understand and evidence risk decisions: The Open Banking credit score has clear explainability so lenders can understand and evidence the decisions driven by machine learning, allowing them to fulfill regulatory requirements around transparency and fairness. It does this by surfacing the five features that most contributed to the person’s score.

One lender using the Signal credit score for those previously declined found that it could accept a third more applicants, while maintaining its default rate – showing there was no additional risk to taking on more applicants that they would previously have declined based on traditional, non-Open Banking credit scores. When used for all decisions they found it could reduce overall default rates from 11.7% to 9.7%, whilst increasing acceptances from 17.5% to 29.8%.

Freddy Kelly, CEO of Credit Kudos, comments: “Credit scores based on traditional credit data is not only limited but can lead to lenders wrongly declining those who are creditworthy. Our new Open Banking-powered credit score, Signal, allows lenders to accurately assess all applicants – including those with thin files – meaning they can safely increase acceptances without increasing risk or defaults. It is highly accurate, fast, and wholly explainable, all of which are integral features to helping lenders make better, more informed and responsible decisions.”

Insolvency spike on the cards for construction sector

Insolvencies in the construction sector could rise as much as 25% in the next six months despite a rebound in orders, reports trade credit insurer Atradius.

In its new Industry Trends: Construction report, Atradius details how the UK construction sector is benefiting from a robust demand-driven rebound which will see growth return after the negative impact of the pandemic. While the sector contracted by 14% in 2020, UK construction output is forecast to rebound by almost 15% in 2021 and grow by more than 5% in 2022. While commercial construction activity is hampered by subdued demand for retail and office space, growth is being predominantly driven by residential building and large public infrastructure projects. However, Atradius also reports that a shortage of construction materials has led to delays in project completion.

With business intelligence on millions of firms worldwide, Atradius reveals payments in the construction industry currently take an average of 90 days. The number of non-payments and insolvencies over the past 12 months has been low. However, both are expected to increase in coming months as government support ceases, while higher material prices and labour costs eat into the financial strength of businesses. Atradius report margins are already tight and any slippage could have a major effect on profitability and performance.

Atradius experts warns that both material and labour shortages have triggered significant cost increases and this knock-on effect will ultimately squeeze profit margins in the short and medium term, particularly for builders with fixed price contracts. Should input prices continue to remain overly high, Atradius forecasts insolvencies could increase up to 25% in the coming six months. Due to the looming downside risks for industry, Atradius’ sector outlook remains ‘poor’ despite the robust rebound in orders and output.

Mike Thomas, Director of Risk Services at Atradius, said: “With rising orders and output, there are new opportunities building in the construction industry which will continue to drive growth. These include pent-up demand for construction works that were put on hold during the pandemic along with benefits from stimulus measures, an increasing focus on sustainability and growing urbanisation in emerging markets. However, despite the market rebound, competition is intense, profit margins are narrow, late payments are rising and there is a higher proportion of business failures than in most other industries. With insolvencies forecast to increase further, businesses in the sector must be prepared to weather the storm by sourcing comprehensive real-time data on their buyers, a proactive credit management strategy and protection against non-payment.”