Digital bank Starling makes first acquisition in quest for faster growth

Digital bank Starling makes first acquisition in quest for faster growth

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UK digital bank Starling has struck a £50m deal for a buy-to-let mortgage group, the first acquisition by the Goldman Sachs-backed start-up that is targeting an initial public offering within two years.

The cash and share purchase of Hampshire-based Fleet Mortgages is intended as the first of a series of deals by Starling, which is looking to deploy its £6.7bn of deposits and build on its rapid expansion during the coronavirus pandemic, according to people familiar with the matter.

Established seven years ago, Fleet manages £1.75bn of mortgages and anticipates originating another £800m this year.  The acquisition will be finalised on Monday, the people said.

Demand for mortgages has surged in the UK over the past 12 months after the government offered buyers temporary relief on the Stamp Duty tax. With millions having worked from home since the pandemic, appetite for larger properties outside of city centres has been also fuelled demand.

Increasing competition between lenders, however, is expected to push mortgage rates lower and squeeze margins for banks.

As part of the deal, Starling will become the sole funder of Fleet's buy-to-let mortgages to landlords