Non-banks to merge and enter mortgage market

Four-year-old self-managed super fund (SMSF) lender Squirrel is set to foray into the Australian mortgage market with “15-minute home loans” in the new year once its acquisition of a UK-based non-bank lender BlueZest Group (operating under the parent company Unique Funding) is complete.

The acquisition is valued at $18 million and will reportedly create a $54 million non-bank financial services group.

Squirrel said it will benefit from BlueZest’s capabilities in “mortgage origination, lending, servicing; software and associated intellectual property in global credit risk analytics [and] decisioning; and a retail bond program listed on the London Stock Exchange… to facilitate securitisation funding of property loans in Australia and the UK.”

In early 2019, subject to regulatory approvals, the combined group plans to launch BlueZest’s mortgage platform that has the capacity to provide “self-directed” borrowers or mortgage brokers acting on behalf of their clients an “unconditional” loan approval within 15 minutes.

Squirrel, which claims to have grown more than 650 per cent in the first three years of operation, said the platform takes into account the importance of mortgage brokers, adding that swift loan approvals mean introduction fees are directed to brokers “in a matter of days and not months”.

The platform is powered by the Nottingham-based non-bank lender’s Zest Engine, which uses 3,000 live data points on a borrower’s income and spending patterns to deliver a fast lending decision.

Squirrel Group CEO Damien Linn, who will lead the combined group, said: “This incredible technology will make a 15-minute home loan a reality. In a practical example, a potential borrower could be inspecting a property, use the Squirrel/BlueZest app to apply for their home loan and, by the time they leave the inspection, have an approved home loan, signed contract for sale and transfer the initial deposit.”

Upon completion of the acquisition, BlueZest will rebrand to Squirrel Money, with a target of £140 million in buy-to-let loans in 2019.

In the meantime, the companies are preparing a prospectus for the BlueZest Secured Retail Bond to accept both UK and Australian property security.

According to Squirrel, this would enable both businesses to “rapidly expand their residential lending businesses without the use of higher cost equity as has been customary for non-bank lenders.”

Commenting on the acquisition, Mr Linn said: “Squirrel and BlueZest share the belief that financial services should be delivered clean, unconflicted, and leverage technology that makes access simpler and easier for everyday consumers.

“The acquisition of BlueZest allows Squirrel to expedite its existing UK market entry plans with the exceptional people, technology and drive that exists within BlueZest.”

[Related: Bank-aggregator reveals post-merger plans]