Starling Bank scoops up UK-based buy-to-let lender Fleet Mortgages in a £50m deal

British digital bank Starling has acquired specialist buy-to-let mortgage lender Fleet Mortgages in a £50m cash and share deal.

With the acquisition, Starling Bank hopes to expand into the mortgage sector, a part of Starling’s wider plan to expand lending, including through further mergers and acquisitions.

Fleet Mortgages – which has around £1.75bn pounds of mortgages under management – will retain its brand and management team. Starling will become the sole funder of future originations, with Fleet Mortgages able to build on its lending operation by accessing Starling’s growing deposit base. Based in Hampshire, the firm focuses on providing mortgages to professional and semi-professional buy-to-let landlords, only via mortgage adviser distribution channels. To date, it has originated £2.3bn of mortgages and experienced zero credit losses.

Commenting on the deal, Starling CEO Anne Boden said, “The acquisition of Fleet Mortgages is the start of our move into mortgages as an asset class and builds on a number of forward-flow arrangements that we’re doing with leading non-bank lenders.

“Fleet’s existing management team will remain in place and Fleet will continue to operate as a stand-alone company, keeping the original name and brand. We’re buying Fleet because it is very good at what it does, not because we want to change it.”

Echoing a similar sentiment Fleet Mortgages CEO Bob Young said, “We started Fleet Mortgages seven years ago and have grown to become a successful mortgage originator with nine well-received securitisations. 2021 is set to become our best year yet with new mortgage loans running at £800 million and half-year pre-tax profits of £4m.”

“Starling Bank will take over all of our funding, allowing us to focus on achieving our significant and ambitious lending and growth targets. This is a natural progression for our lending business, with both Starling and Fleet sharing a very similar cultural fit, and provides us with a very strong lending base from which to work and to deliver for our staff, our adviser partners and our landlord customers.”

Businesses operating in the housing market have become potentially lucrative investments in the past year, as buyers have poured into the market and driven up prices by more than £20,000. HMRC has estimated that 213,120 residential transactions were finalised in the UK during June, the largest amount since it first started collecting the statistics in 2005.

The acquisition comes just days after Starling reported 600% in revenue growth to nearly £97.6m in the 16 months to March 2021, and unbroken monthly profit since October last year. Its customers more than doubled to reach 2.1million, and deposits grew from £1bn to £5.8bn. It claims to open a new account every 34 seconds.

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