Britannic moves into flexible mortgage market with First Active Financial deal

Britannic, the life assurer, has made a direct move into the mortgage market with a £57.2m deal to buy a majority stake in First Active Financial, the Surrey-based flexible mortgage specialists.

Britannic, the life assurer, has made a direct move into the mortgage market with a £57.2m deal to buy a majority stake in First Active Financial, the Surrey-based flexible mortgage specialists.

Britannic, which already sells other providers' mortgages, including those of Halifax and Abbey National, will own 60 per cent of First Active Financial and will rebrand its mortgages next year. The group is considering renaming the mortgages Britannic.

First Active's parent, the Irish bank First Active plc, will retain a 40 per cent stake in its British subsidiary. First Active plc ranks as Ireland's fifth largest bank.

The chief executive of Britannic, Brian Shaw, said: "This is a further important step in Britannic's development as a modern financial services group."

The initiative will be seen as an attempt by Britannic to reposition itself by gaining a slice of the business from higher income earners. Britannic, which has £19bn of funds under management, currently makes most of its profits through its direct door-to-door sales of insurance products in the low to middle income market.

Marisa Cassoni, Britannic's finance director, said: "First Active is an attractive proposition as it sells most of its mortgages to sophisticated investors in their forties."

Ms Cassoni said that, while the group expected to cross-sell its insurance products to its mortgage customers and vice versa, this source of revenue had not been built into the price of the deal.

Yesterday's announcement came as Britannic unveiled a £22m decline in pre-tax profits to £161m for the six months to 30 June. Ms Cassoni said the fall was due to fluctuations in the investment performance of funds which were heavily weighted to Old Economy stocks. Overall, the group saw a 7 per cent rise in operating profits.

First Active currently controls 5 per cent of the market for flexible mortgages, which allow home buyers to vary the amounts they want to pay back each month and does not levy heavy upfront charges. Within this sector, it holds about 80 per cent of the current-account flexible mortgage market, which allows customers to offset their salaries against their mortgage debt each month.

Tony Ward, the chief executive of First Active, said: "Our levels of new business have grown by 80 per cent from 1998 to 1999. But now the race has intensified, with a lot of providers coming into the flexible mortgage market. This investment by Britannic will allow us to put our foot on the accelerator."