Buy-To-Let Curbs Loom Over Charter Court Sale

A mortgage lending clampdown proposed by the Bank of England is looming over the auction of Charter Court Financial Services, a challenger bank which generates much of its revenue from buy-to-let loans.

Sky News has learnt that the buyout firms Centerbridge and Warburg Pincus have tabled a joint bid for Charter Court worth around £400m.

BC Partners and General Atlantic Partners, two other private equity groups, are also understood to have made separate bids for the company, which trades under brands including Precise Mortgages and Exact.

The auction of Charter Court, which is being handled by Deloitte, has been running for several months.

Elliott Associates, a hedge fund, owns a controlling stake in Wolverhampton-based Charter Court.

One source said that a number of bidders were using new underwriting standards proposed last week by the Prudential Regulation Authority (PRA), an arm of the Bank of England, to try to drive down Charter Court's price tag.

George Osborne, the Chancellor, and Mark Carney, the Bank of England Governor, have expressed concern in recent months - rejected by many bankers - that the buy-to-let market is in danger of overheating.

In the latest proposals, the PRA said that more stringent checks on borrowers' ability to repay loans at higher interest rates aimed "to prevent a marked loosening in buy-to-let underwriting standards and to curtail inappropriate lending and the potential for excessive credit losses".

However, sources familiar with Charter Court said the new rules could benefit the business because the departure of other participants in the buy-to-let market could provide an opportunity for it to grow its market share.

"This is a high-quality business with very high underwriting standards," the source said.

It (Other OTC: ITGL - news) is unclear whether the auction is likely to conclude prior to June's referendum on the UK's membership of the European Union, with some economists warning of risks to sterling and the housing market in the event of Brexit.

Charter Court also owns Charter Savings Bank, which began taking deposits last year and had opened more than 30,000 savings accounts when the company last updated on trading in November.

At the time, Ian Lonergan, Charter Court's chief executive, said: "Along with other challenger banks of a similar scale, we are bringing a new level of choice and service to customers who are disillusioned with high street banks.

"Our loan performance and service levels remain very strong due to the investment the business has made in excellent people and a scalable infrastructure."

Charter Court could not be reached for comment on Friday while Deloitte and the bidders all declined to comment.