Savings market expands to fund mortgages

14 May 2018

I have written many times over the years about mortgage funding and it is great to see the securitisation market coming back, driven substantially by the withdrawal of the term funding and Funding for Lending schemes.


Of course, before wholesale funding came to the UK in the 1980’s, mortgage lending was funded almost in entirety by deposit book balances. This is still the case for many building societies thriving today. However, the market is seeing an increasing appetite from mortgage originators, currently reliant on various funding lines, looking at taking deposits as an additional funding option.


It is estimated there are circa forty banking licence applications with the regulator and it is quoted that this is testimony to a buoyant “challenger bank movement”. The reality is that some of these applications are purely to enable lending institutions to take deposits to assist mortgage funding, and not to offer a full range of banking services such as current accounts. Therefore, they will not really be challenging the Big Four in the way the government originally anticipated, apart from making secured lending more freely available.


Clearly there are exceptions to this, such as Atom Bank which offers a broad range of digital banking services, but it is great to see the positive licence granting environment being used to aid funding to ensure liquidity and competition exists in the lending market.  There are some fine examples of businesses that are successfully doing this including Hampshire Trust, Cambridge & Counties and Charter Savings Banks. 


The growth in new deposit takers has created more competition in the technology market with existing players such as Phoebus Software reviewing our deposit origination and account servicing software offerings. What is noticeable is that by reviewing market requirements, they are evolving extremely quickly.


There is not only the futureproofing of technology investment to consider, but the varying savings products both new and existing providers are looking at offering. Traditional ISA’s and child ISA’s in the current low interest rate environment are not as popular. Many savers still look at maximising these for whatever tax benefits they can get however, so they are a key product to many building societies. Those new entrants offering savings to fund lending tend to provide fixed term products to ensure they can balance any potential run on funds. Another growth area is commercial deposits which can fund commercial lending at higher margins and there are also charities to cater for.


The savings market will continue to grow for many reasons and this is a good time to weigh up the suitability of current software solutions to ensure potential future requirements are catered for. Areas such as self-service around maturities are available and can be a huge operational saving when products come to expire. The evolution of savings technology today feels very similar to the boom of mortgage origination technology in the early 2000s. Now is the time to consider futureproofing requirements in this product sector.


Media contact

Debbie Staveley
Director and Owner,
bClear Communications

+44 (0)1275 542 511


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