Finance

Starling Bank makes first acquisition with £50m deal for mortgage lender

Starling Bank agreed to acquire a buy-to-let specialist mortgage lender in a £50m deal, marking the fintech firm’s first acquisition as part of a new strategy.

Hampshire-based lender Fleet Mortgages, which has £1.75bn in mortgages under management, will join forces with Starling Bank later this year.

Starling plans to be the sole funder of all future originations, while Fleet will access Starling’s deposit base for lending. The day-to-day operations of the business and its management team will remain unchanged, the firms said in a 26 July statement.

The announcement comes as Starling develops its strategy as a profitable business, with chief executive Anne Boden outlining plans to increase acquisitions as a way to bolster its balance sheet.

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Starling’s customer deposits reached £2.3bn across its retail accounts as of March this year, while the bank’s annual losses reached £31.5m. Starling has been profitable on a month-by-month basis since October last year.

“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,” said Boden.

“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.”

Starling said the purchase is part of a wider plan to expand lending at the bank across forward-flow arrangements, organic lending and additional M&A activity.

Fleet has originated £2.3bn in mortgages since its founding in 2014, and said it has experienced zero credit losses while booking a half-year tax profit of £4m in 2021.

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It specialises in mortgages to professional and semi-professional buy-to-let landlords, marketing its products only via mortgage adviser distribution channels.

“We are very pleased to be announcing the acquisition of the business by Starling Bank which will deliver a significant benefit to the business, our intermediary partners and their landlord clients. It is certainly exciting times ahead,” said Fleet chief Bob Young.

To contact the author of this story with feedback or news, email Emily Nicolle

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