Virgin Money – the first year in the mortgage market

There is no doubt that when Virgin get involved in a business sector, they make things happen. And the lending/banking world certainly need things to happen. It has been almost a year since Northern Rock was formally taken over by Virgin and it is now branded as Virgin Money. So, are Virgin repeating their midas touch?

From a mortgage processing perspective, there is still a long way to go. With mortgage applications being slow to progress through the system. However, it is important to note that this is currently the situation with many other high street lenders too. What hampers Virgin Money a little further is that the underwriters do not seem to know what paperwork they need to process the application. They ask for a certain amount of documents, these are sent in and around five days later they ask for some more. Something tells me that given time, these issues will be ironed out, but now a big frustration.

On the money front, the new Northern Rock, when Government owned, had a very cautious approach to lending and that has not changed under the new ownership. They only want the ‘squeaky clean’ clients. And even then, some of the questions underwriters have asked in recent times have been ridiculous. If they had applied basic common sense when looking at the application and supporting documents, the questions would not have needed and the application would not limp through the system so slowly. So if you need a mortgage application to be processed quickly, this is not currently the bank for you.

The advantage that has been gained from this scrutiny when underwriting, looking only for the perfect applicant, is that Northern Rock as it was and Virgin Money now, can offer highly competitive rates to those clients. But, even more important that this, they have built confidence in the brand once more. There is still a long way to go, but nevertheless under the Virgin Money brand confidence is building. In June 2011 Virgin Money completed a £700m Securitisation and has announced another has been secured to provide another tranche of funds for lending. (Securitisation is explained below).

Virgin has also applied for the Governments ‘Funding for Lending Scheme’ which was announced in August 2012, whereby the Bank of England lend money to the banks for them to lend to small business and mortgage borrowers. Figures on how many banks have applied for this fund vary from one source to another. At the September 2012 Mortgage Next Intelligence conference, Nationwide, Barclays, Santander and Aldermore confirmed they had either applied or had funds.

Therefore, with two Securisations and Funding for Lending Scheme under its belt, Virgin Money is certainly making steps in the right direction. What we need to see is these funds being used to make mortgages available to more people – whereas the fear is that it will just provide cheaper borrowing for those who can access borrowing already.

It may not be entirely fair to compare an existing, albeit re-hashed, company like Northern Rock/Virgin Money with a brand new bank – however, Aldermore who started lending for mortgages in 201o are still finding their feet. They don’t appear to really know what type of business they are looking for and have struggled to find a real USP. Every mortgage application that has passed through Harvey Bowes since the launch of Aldermore, the client either does not comply with criteria for any lender, or they could access a cheaper product with a better known high street brand than go to Aldermore. So, while Virgin Money is looking for a different sector of the market, at least they know what they want!

Although Virgin Money money are getting a very small proportion of our mortgage applications at the current time, mainly due to poor service levels, I can see this as a mortgage lender with momentum, a positive development for the market and one to be watched.

To find out more about Harvey Bowes, or to discuss your mortgage requirements, call: 029 2115 6918



What is Securitisation?

Securitisation is the financial practice of pooling various types of contractual debt such as (but not limited to) residential mortgages. The mortgage lender sells a specified proportion of its mortgage ledger as consolidated debt to investors. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly. By selling the mortgage debt in this way the mortgage borrower still has exactly the same relationship with their lender on the same terms and conditions, however the lender has an influx of funds then available to lend to new borrowers. Securitisation was big business before the ‘Credit Crunch’ and heavy reliance on this way to raise funds was a big contributor to the fall of a number of lenders at the time. But that does not mean it is a bad thing; and because of the lessons learned from that era, there is a more cautious approach now.

About harveybowes
Mortgage Broker and founding Director of Harvey Bowes Limited. A mortgage broking practice with bases in Cardiff & Poole, UK. We take a fresh and positive approach to mortgage broking which pays dividends for both our clients and frankly, ourselves. The team at Harvey Bowes are expert advisors in all aspects of mortgages from residential to commercial and buy to let.

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