Starling Expands Mortgage Book

Starling Bank has agreed to buy the mortgage book of lender Masthaven, worth around £500 million, i

June 16, 2022
Starling Expands Mortgage Book
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Starling Bank has agreed to buy the mortgage book of lender Masthaven, worth around £500 million, increasing their own mortgage portfolio.

The bank had previously taken its first steps into mortgage lending when it bought Fleet Mortgages in 2021, with the £50 million acquisition seeing them take on around £1.75 billion in mortgages that were under management.

The news comes as Starling continues to diversity its lending portfolio amid criticism over the potential fraudulent COVID loans that is has issued since the start of the pandemic.

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Starling Gains From Masthaven’s Struggles

The specialist lender Masthaven was given its banking licence in only 2016, but by February of this year it announced that it was already planning to wind down its services. The bank said that it had struggled to secure the funding that was necessary to continue to grow, and so was looking to sell of its mortgage book by 2023.

Starling has then swept in and acquired the loan book to further enhance its own mortgage portfolio. Anne Boden, the chief executive of the company, has said that this acquisition is the beginning of its move into mortgages as an asset class.

When Starling previously bought Fleet Mortgages, it was that it was part of a wider plan to begin expanding its lending services. There are rumours that Starling will next look to pick up the mortgage book of Kensington, another specialist mortgage provider that is looking for buyers for its £1 billion portfolio.

Masthaven and Starling have otherwise refused to comment so far on the sale.

Diversifying Interests As Protection?

While Starling has long held ambitions to grow its lending portfolio with different kinds of assets, the timing of this move is interesting due to the backlash the bank is receiving from financial officials over its COVID lending.

Of the £2.3 billion that the bank is currently lending, £2.2 billion is through the various Coronavirus loan schemes available to small and large businesses. The bank had only lent £54 million to customers before the beginning of the pandemic, while COVID loans were seen as a safer option due to the government backing, should they fail.

But the bank has been criticised for not carrying out stringent-enough checks into lenders amid fears that many who borrowed were fraudulent and will be unable to repay the money. Many who applied for loans did so for banks that had already ceased trading, or that were unable to viably continue.

The bank has defended itself against these accusations and claimed that it has identified and rejected more fraudulent lenders than other banks, although there is a concern about how quickly Starling ramped up their lending once the government-backed schemes were in place.

The move to begin offering mortgages more widely will be seen by some as a chance to protect itself, with a more diverse portfolio that provides a solid financial base away from the controversial loans.

Ian Lewis
Ian Lewis
Ian is an experienced writer with 15 years’ experience working in journalism and marketing. He’s worked in-house in financial institutions as well as writing freelance pieces for a variety of banking and financial trading websites.

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