Specialist lender Magellan Homeloans has closed to new business today, citing market competition pressures of shrinking interest rates and increasing credit risk.
The lender said it will honour any unexpired mortgage offers, but it will not extend or materially vary those offers issued.
However, it will immediately stop accepting new applications and will not progress any decisions in principle or applications in the pipeline.
It added that applicants who have paid administration or valuation fees to Magellan but who have not received a mortgage offer will have those fees refunded.
There will be no impact on existing customers whose mortgage loan has completed, all contractual obligations still apply and their home may be repossessed if they do not keep up repayments.
A 30-day consultation period will commence for the lender’s 65 employees dedicated to new business in its Leatherhead and Birmingham offices.
Employees of third-party customer services providers are not affected by the announcement.
“In response to competitive pressures the business has recently seen a number of lenders reducing mortgage loan interest rates and increasing credit risk despite increased funding costs,” Magellan said.
“Viewing this as unsustainable Magellan has reluctantly taken this decision, having considered a number of alternative options.”
It added that applicants affected should contact their mortgage adviser with whom Magellan will, within the next two weeks, seek to make arrangements where a refund of fees is due.
The status of all affected pipeline cases will shortly be updated on the Magellan Hub. Intermediaries with any queries should contact Magellan through their regional sales manager, regional account manager or the helpdesk on 0330 335 5777.
Not viable long-term
CEO Matt Gilmour said: “The competitive landscape has continued to shift, mortgage loan interest rates are reducing when the cost of funding is rising, and some lenders are taking on more credit risk despite the volatile economic backdrop.
“Magellan has prided itself on maintaining excellent credit standards while helping customers who have been disenfranchised by high street lenders. However, we do not wish to compete in a market which we view as unsustainable.
“The determination, commitment and tenacity shown by everyone at Magellan Homeloans has transformed our business into a mortgage lender to be proud of. It is with great regret and sadness that the board has concluded that it is no longer a long-term viable business.”
Owain Thomas is features and contributing editor of Mortgage Solutions and editor of Specialist Lending Solutions.
He also has experience in the protection, pensions, workplace benefits and HR areas.
Owain has won two Headline Money Awards and the Protection Review’s Journalist of the Year award.