Alt Lending Week ended Ended 17th June 2022
UK mortgage lending underwriting has grown old and tired
Gerard Lyons who I believe would have made an excellent candidate for governor of the Bank of England rather than the less than impressive Andrew Bailey makes the point that PM Boris Johnson’s comments on the housing market last week were unlikely to be effective. He suggests that mortgage lenders should consider reducing the huge deposits that first time buyers a forced to come up with which means that many quite eligible and high earning couples are stuck in rented accommodation where they are unable to move onto housing ownership. This has a drag effect on the whole of the market. Lenders refuse to accept a strong track record of rental payments as evidence of trust. They should reconsider or some bright spark should come up with an insurance product to cover part of the risk. The security of the property is after all the secondary source of repayment after the earning power of the owners. In the Uk we have priced mortgages incorrectly for years. Time for a rethink.
This is a story that doesn’t want to go away and paints a woeful picture of the mindset of EU institutions who are constantly thinking up new ways to undermines London as a financial sector. US banks are showing some resistance to these moves and for very good reasons. None of the continental centres have the same depths of liquidity technical and business expertise as London has or Zurich has for that matter, Ultimatelt forcing European companies to use European banks to process transaction will cost European clients more and limit their ambitions. This doesn’t seem to matter to the bureaucrats in Brussels whose only thoughts concern punishing Britain for having the temerity to reject the EU outright. There are three major reasons why London is preferred by New Yorkers. Firstly we speak the same language (yes it still matters) secondly we think more like the Americans and thirdly London is more fun. There is another reason Banking and finance are creative businesses. Not much creativity over the other side of the channel.
Another tale of unrelenting Hubris in London valuations.
My first reaction to this story was to wonder who Bank of London group was. Turns out it is a unicorn that has raised money on a valuation of over £ 1 billion. Not bad for a start up but apart from holding nine patents and promising to “transform the very fundamentals of banking” it looks to me like another possible piece of snake oil salesmanship. I wish them all the best but I’ve seen it all before. The company has net assets of £ 21,3 of which £13 million is in cash, and made a £ 48k loss in its first published accounts. Its founder is a technician as is its chairman and its board contains Lord Mandelson one of Tony Blair’s old mates. I am sorry but these valuations are ridiculous. Also what are the fundamentals of Banking? Technology doesn’t change them or they would already have changed by now. The start up space looks very crowded with highly speculative ventures.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information. For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives. Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.