How the Co-op’s botched deal has cut TSB out of half of the mortgage market

New high street bank TSB can only access half of the mortgage market because it does not have the systems in place to sell through mortgage brokers, chief executive Paul Pester said today – and it is thanks to the Co-op’s botched attempt to buy the lender.

 

As 40 to 50 per cent of mortgages are sold through brokers, most banks have systems in place to let the intermediaries access the loans.

 

When the Co-op tried to buy TSB from Lloyds, it already had those systems, so it told Lloyds not to bother building new ones for the new bank.

 

But the Co-op’s bid collapsed last year and the TSB is being set up as a standalone bank – without the systems to sell through brokers.

 

As a result TSB has to do the technical work itself.

 

Regulators have piled other new rules on mortgage lending onto banks, so up until now the TSB has been busy implementing those – such as the mortgage market review rules, which came in last month.

 

Only now can it get to work building infrastructure to access brokers, and the bank expects to have the system in place by early 2015.

 

“Our guys are getting a copy of the Halifax’s system, which is one of the biggest and most sophisticated in the country, and building it from there,” Pester told City A.M.

 

At that point it really hopes to boost its growth, planning to increase its balance sheet by 40 to 50 per cent in the next three or so year.

 

“It is all retail mortgage growth. Mortgages, mortgages and more mortgages”, Pester said.