Posted on 17 August 2015 by
The year is 1974 and David Essex is riding high in the charts. Children up and down the country are riding Chopper bikes and a politician called Margaret Thatcher is gearing up to challenge Edward Heath for leadership of the Conservative Party, a bold move that could see her become Britain’s first female Prime Minister.
It is also the year that a mortgage broker called John Charcol is founded in London — a company that would go on to help more than 200,000 people buy their homes over the next 40 years but be bought and sold several times and even collapse into administration at the height of the recent financial crisis.
After an eventful four decades, John Charcol is now settled under a management team led by chief executive Simon Knight, after a £14 million buyout from the insurance broker Towergate earlier this year.
The deal was backed by Palatine Private Equity and comes at a time when Knight — who briefly worked for John Charcol in the Eighties — believes mortgage brokers are more important than ever.
“Almost 70% of all mortgages are currently done through brokers and you have to ask yourself why that is,” he says.
“Even though interest rates are low and people want to buy property, it’s increasingly hard for them to find mortgages — especially young people who are being priced out of the market.”
John Charcol currently places about £2 billion of mortgages for 6,000 customers each year and counts major High Street lenders, private banks and building societies among the providers it helps customers borrow with.
“When the management team and Palatine decided to buy the business, we did so because of the John Charcol brand,” Knight adds.
“It was an opportune purchase because it was not a core business for the previous owner. We are London and south-east-focused and our average loan is probably around the £400,000 mark, but we do larger and smaller loans as well.
“Buy-to-let is also increasingly a larger part of the business.”
But what has the industry learnt from the financial crisis? It resulted in John Charcol itself falling into administration in February 2010 following the collapse of the mortgage market, before it was snapped up by Towergate in a controversial, pre-pack deal.
“I think it’s fair to say that the financial crisis has created a much-better environment where companies take a longer-term view when providing funding to customers,” says Knight. “Importantly for us, this means that our customers’ circumstances are fully understood and then being accountable for the advice we provide.”
Backed by Palatine, Knight and his management team now plan to invest in the business to help it take advantage of the buoyant housing market.
So what advice does Knight have for entrepreneurs considering taking part in a management buyout?
“Know what value looks like and always be prepared to walk away if the deal isn’t right,” he says.
On the future for John Charcol, he adds: “We’ve not only done mortgages for people 40-plus years ago, but we helped their children find mortgages and now we’re seeing the third generation. We’re very excited about what the future holds.”
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