Challenger bank shows how lenders are very much open for business

Prior to the summer budget, challenger banks thought that the government was on their side. Or if not ‘on their side’, at least willing to give them a fair crack at competing with established mainstream lenders.

Chancellor Osborne’s introduction of an 8% corporation tax surcharge on banks that made profits over £25M put paid to those hopes. But, despite the unforeseen levy, one bank – OneSavings Bank, to be precise – is still confident of turning a healthy profit this year.

Shares in OneSavings Bank double in twelve months

It’s no surprise. Since floating on the stock market a little over a year ago, the bank’s share price has rocketed. This welcome surge of investment has enabled CEO Andy Golding and his team to be bullish in the market.

Like everything in business, you make your own luck, starting with being in the right place at the right time. This is how this bank’s business plan fell into the lap of the gods, no doubt guided by the strong team here on terra firma at the helm.

The shift in the market that paved the way

Until two years ago, mortgage lenders still had the heebie-jeebies about lending on domestic properties to homeowners. Help-to-buy has helped since, and been the catalyst for lenders to introduce similar products to the two 5% deposit schemes the government introduced to kick-start both the construction and housing markets.

Between the economic crash until that point, new mortgagees hardly got a look in unless their credit was A1 and their deposit substantial. Banks preferred buy-to-let landlords for mortgages; for commercial loans, many banks favoured property development, with a view to business rental, over other forms of lending.

Bottom line? If you were borrowing for business, you were good to go. If you were looking for personal finance, the odds were stacked against you before you walked through the branch’s automatic doors.

Banks forced to rebalance loan books

When mainstream lenders adopted Help-to-buy, the whole market changed. Following the MMR, those on the sidelines realised that lenders would soon have to balance their loan book.

Too much emphasis on commercial business and not enough commitment to generating new home ownership had been the recipe keeping banks ticking over. All of a sudden, it was off the menu.

Coventry and HSBC cutting their lowest mortgage rates to buy market share despite the threat of a rise in the BoE base rate exemplifies that thought process to a tee.

The problem with this shift is that the government is still intent on rebuilding the economy. Businesses still need cash injections:
* landlords, as buy-to-let properties are still greatly in demand from those who can’t get on the property ladder;
* developers continue to build and renovate commercial premises to house the blossoming ranks of the self-employed and small businesses.

This new entrée was the cocktail for success for OneSavings Bank. The Telegraph goes into the detail of just how far the challenger bank has come in twelve months, highlighting that banks are open for businesses’ business. You just might have to look down new avenues to find the most competitive loan for your project.

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