Metro Bank sells 33% of its mortgages to NatWest

Metro Bank has just sold around one-third of its residential mortgage products to high-street bank NatWest. The sale of these mortgages is estimated to affect 13,000 homeowners.

The portfolio of mortgages sold to NatWest consisted of an average outstanding debt of  £238,000 with an average Loan to Value (LTV) ratio of 60%. The average fixed-rate interest term is two-and-a-half years.

A Metro Bank spokesperson stated that the sale has already been completed, but there will be no immediate impact on the bank’s existing mortgages. Those mortgages sold to NatWest will be transferred gradually over a period between one and one-and-a-half years. Moreover, Metro bank will continue to offer mortgages to new customers.

So, why has Metro Bank sold its mortgages?

The sale of the mortgage portfolio to NatWest has an estimated value just over £3 billion. The money raised by Metro Bank will be used to switch attention to credit card products and personal loan lending. This has been confirmed by Metro Bank’s Chief Executive, Daniel Frumkin. He stated that the sale would increase lending capacity within the bank’s unsecured lending portfolio.

However, the sale may also be the result of some difficult years for Metro Bank. It was the subject of negative press in 2019 when industry regulators uncovered a significant accounting error. This sent the share price for the bank tumbling. Metro Bank decided to create a turnaround plan, which was derailed by the COVID-19 pandemic. Metro Bank posted its half-year results during the midst of the pandemic, highlighting a loss of £109 million.

The sale of 33% of the bank’s mortgage portfolio has had a positive effect on the share price. Metro Bank’s shares increased by 28% straight after the announcement, which is also the highest share value they have had throughout the whole pandemic period.

NatWest’s motives

The NatWest group - which includes Royal Bank of Scotland, Ulster Bank and NatWest – has just over a 10% market share of UK mortgages. Chief Executive of the group, Alison Rose, stated that expanding NatWest’s mortgage portfolio is an important strategy to generate sustainable returns for its shareholders.

NatWest is also leading the way on green mortgage deals, a type of mortgage that offers lower interest rates when purchasing more energy-efficient properties. By the end of the decade, NatWest hopes to hold a significant number of mortgages for greener properties.

What happens next for affected customers?

From the 22nd of November, customers will start to receive NatWest roll-off letters inviting them to complete their mortgage product transfer application with NatWest, which is a great benefit to consumers.

Mortgage brokers can advise and transfer benefiting clients onto these new mortgage products from Monday the 22nd of November. Book an appointment with our professional mortgage team via our online diary for tailored advice and support.

December 2021