Molo co-founder and chief executive Francesca Carlesi said the digital mortgage lender is in a “better position” now and has “learned our lessons” after suspending its buy-to-let (BTL) lending on a temporary basis earlier this year due to “funding issues”.
Lending was suspended in April due to “recent changes in the capital markets”, where Molo acquires its funding from, rather than through customer deposits, as is the case for bank lenders.
The changes were due to both “spiking inflation” and an interest rate rise carried out by the Bank of England.
Speaking on the Lenders Live LinkedIn panel hosted by Knowledge Bank, Carlesi explained: “This is not something you’d expect but it’s something that happens. Capital markets are probably less patient than other types of funding and some of them are unfortunately over reactive to market shifts.”
“As a result, we negotiated that we just keep funding mortgages because for no reason we have to have to pull any offer to our customers and we were left with no choice but to reprice some of the offers outstanding.”
“The reason we did that because we wanted to be in a position to honour all offers to our customers and I am proud to say that in spite of the severe issues our funders created for Molo, we were still able to fulfil all offers outstanding but inevitably we had to do some heavy repricing given how sudden the change was. We have not repriced the full pipeline, we have just repriced for three weeks of the pipeline so probably in total 30 or 40 customers and now we’re set up a new funding line, which has allowed us to restart completions on normal terms and also providing us access to more stable and reasonable source of funding than before.”
Carlesi said: “For now, the storm has gone but it was quite an intense moment. In a way, we were left with no choice. The good news now is that we have set up things in a way that is even safer than before.”
From a broker’s point of view, she noted that the situation was “not great”, but she explained that Molo “tried to communicate to everyone such as customers to brokers and explain the reasons why”.
“In a way, we were left with no choice. The good news now is that we have set up things in a way that is even safer than before.”
Knowledge Bank non-executive director and panel host Ying Tan explained: “Communication with brokers is imperative when things like this happen suddenly. There are lots of factors outside lenders controls and certainly brokers controls, but it’s really important that line communication and transparency is key to making that shock as minimised as possible.”
Meanwhile, Kensington Mortgages new business director Craig McKinlay said: “It’s a tough market and it’s a case of there are no clear, easy answers. Essentially, it’s picking your poison and deciding the pros and cons, you’ve got to find a way to navigate it as best you can.”
Marketing gimmicks or lender empathy?
Earlier this month, Santander granted a temporary one-month mortgage offer extension for remortgaging and purchasing because of the high volume of mortgage applications.
The Lenders Live panel discussed whether they thought this kind of offer is a “marketing gimmick” to help build goodwill or if the lender is showing genuine empathy to clients and brokers during this challenging period.
Coreco managing director Andrew Montlake described it as “a great move”, which he finds “really interesting”.
“I would like to see old lenders really understand the process is elongated now, you used to be able to go from application to completion in three months but now that has moved to four, five or even seven months. The whole process is getting longer as lenders are inundated.”
“As brokers, we understand and completely understand we shouldn’t be abusing lenders, we should be celebrating lenders who do give us the 48hours or who do things such as Santander has. I don’t think it’s a gimmick, I think it’s a real understanding of what is happening in the market and it’s appreciated.”
“It also shows that lenders value brokers and do understand what’s going it. Yes, it gives them a bit more time to process stuff but that’s a sensible thing to do, it’s very welcome and I would like to see other lenders follow.”
The Mortgage Lender sales and product director Steve Griffiths suggested that “there is no bad side to what Santander has done”.
“I think great, great initiative, it might be a bit more complicated for smaller and more specialist lenders to replicate. However, that said we’re looking at technology and processes, and what can we do to make sure that that customer journey is as slick as possible, whether that’s initial offer, offer extension, or whatever that may be,” Griffiths adds.