Property Natter – will challenger banks ever be…

But will they ever have the same involvement in the real estate market as the high street lenders? Will we ever see a Starling or Monzo home price index to accompany the highly respected ones we see from Nationwide and Halifax on a monthly basis?

I decided to take a closer look.


What is the story? A capital-based digital challenger bank, Starling Bank was founded by Anne Boden, the former COO of Allied Irish Banks, in January 2014. Since its launch, it has reportedly received over £500m in funding and is focuses most on current and business accounts. In July 2016, it received its banking license from the Prudential Regulation Authority and the FCA.

Does the bank offer mortgages? Not strictly, but Starling offers a financial marketplace that has brought together a world of financial products to help its customers better manage their money. “From mortgage and insurance providers to smart retirement tools, we’ve curated a selection of third-party products that work with your Starling app,” the website says.

These third-party providers include Habito, the online mortgage broker, which scours the market to find the best deals for Starling customers. Last July, he also announced the acquisition of rental purchase specialist Fleet Mortgages in a £50m cash and share deal – its first acquisition and an integral part of its push into the mortgage business.

In November 2021, in the meantime, he would have bought a £1 billion mortgage pound as it sought to drive growth and battle with traditional high street lenders. More recently, it has been reported that Starling was in a bidding war with Barclays to buy Kensington’s mortgage platform.

A Starling spokesperson told me, “In 2021, we acquired Fleet Mortgages, a specialist buy-to-let lender, as part of a plan to expand our lending. We are considering a combination of strategic forward flow arrangements, organic lending across various asset classes and a targeted M&A strategy focused on selected loan originators. Starling does not create its own mortgages.

It looks like Starling could grow to fully enter the mortgage arena at some point, but isn’t there yet.


What is the story? Perhaps the most well-known of the digital challenger banks, thanks to its distinctive orange branding and hipster vibe, Monzo was founded in 2015 by a team who originally met while working at Starling Bank.

Originally called Mondo, before a copyright claim was paid, it started life as a prepaid debit card working through a smartphone app, before receiving its license in April 2017, allowing it to offer complete current accounts. It was said to have over four million customers in March 2020, but it has also operated at a loss in recent years (not unusual for a startup of this size, but there has been talk that she has serious problems). He was also investigated by the FCA on anti-money laundering rules.

Does it offer mortgages? No, but in July 2019 it partnered with online mortgage broker Mojo to test a new remortgage feature, to allow homeowners to get mortgage quotes and book an appointment with a Mojo expert advisor. It offers Monzo Flex – a buy now, pay later (interest free) feature – and personal loans up to £25,000, but no mortgages. It hasn’t been acquired like Starling and doesn’t offer a capital market like its rival, suggesting it won’t be getting into big loans any time soon.

Atom Bank

What is the story? A retail bank founded in 2013, it was the UK’s first bank designed for smartphones or tablets, without branches, and the first digital-only challenger bank to obtain a full UK regulatory licence. Based in Durham, the bank may not enjoy the same recognition or fame as Starling and Monzo, but has done well in lists of top performing startups. It was founded by Anthony Thomson, co-founder of Metro Bank, and Mark Mullen, former CEO of First Direct.

Does it offer mortgages? Yes, it is the only one of the big four challenger digital banks offer mortgages. It offers first-time homebuyer loans, mortgages, new mortgages, and near-prime mortgages for those with “less than perfect” credit scores. It aims to simplify mortgages, with quick decisions and a simple process. Plus, because everything is done through an app, the bank says customers can securely track their mortgage application every step of the way.

Most mortgages offered are fixed rate with initial terms of two to five years. When which one? verified in September 2021, the bank had just over 100 mortgages available to customers. Consumer body’s review of Atom Bank’s mortgage offering can be seen here.

In November of last year, Atom entered into a £500m funding partnership with lending platform Landbay to target prime residential rental mortgages.


What is the story? A London-based FinTech company, it was founded in July 2015 by Nikolay Storonsky and Vlad Yatsenko. It offers accounts that include currency exchange, debit cards, virtual cards, Apple Pay, interest-bearing “vaults,” crypto, commodities, and other services. It has expanded into Japan and other new markets and has approximately 5,000 employees.

Its £4.2 billion valuation makes it one of the UK’s most valuable FinTechs. In January 2021, she applied for a UK banking license. According to the FAQ section of its website, it still does not hold a full UK banking license, but instead uses an FCA-regulated e-money land-based payments license. At present, he is still pursuing the elusive British license to officially become a bank.

Does it offer mortgages? No, but like Monzo, it offers personal loans up to €25,000. Additionally, in April 2017, it has partnered with the UK’s first online mortgage broker, Trussle, to give users direct access to its mortgage brokerage service, which searches thousands of products from more than 90 lenders to find the most suitable deal for a borrower. The desire is also there expand into mortgage lending, with CEO Nik Storonsky looking to enter the mortgage business as part of plans to become a so-called superapp. But he also said the fintech company needed to do more to become a one-stop-shop for financial services.

Property Natter – will challenger banks ever become major lenders?He told Reuters: “For example…decentralized wallets, and allowing deposits, withdrawals of crypto [and] staking, lending – that’s another element we’re missing and working on. He added that it’s also important for the company to consider expanding into mortgages, as home loans “are a pretty big part of consumers’ financial lives.”

Without a full UK banking license, however, expansion into mortgages is likely to remain a pipe dream for now.

In addition to the four big names above, there are other smaller challenger banks that have a stake in real estate in one way or another – including Gatehouse Bank and Aldermore – but apart from Atom Bank, none yet offer mortgages in the traditional way. To become a major lender requires very large amounts of capital, which the challenger banks are not quite there yet, on the whole.

But, as the concept of digital banking becomes increasingly popular – and is surely the future as more bank branches close their doors – we could see more and more challenger banks looking to shake up the status quo and threaten the dominance of traditional big names. in mortgage loans.

It will be interesting to see whether the big banks and lenders – the HSBCs and Barclays of this world, which are already increasingly digitalizing themselves – will adapt quickly enough to keep digital newcomers at bay, or whether mergers between digital and traditional banks could start becoming a thing.

Anyway, to think about.

Until next time…

*Nat Daniels is CEO of Angels Media, publishers of Estate Agent Today and Letting Agent Today. Follow him on Twitter @NatDaniels.

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