HAVING occupied the managing director's office at First Active for a scant four months, Colm Furlong has barely had time to sit down and break in the leather of his plump executive's chair. But if he proves as good as his word, he won't be relaxing on the job very often.

Furlong presents himself and his company as product innovators in the residential mortgage market, an arena where differentiation is measured in fractions of percentage points rather than bells and whistles. It's a biggish claim that he stands up on the back of the lender's record of consistent new product introductions over the last few years, going back to the Utopia splitterm mortgage in 2002 - a period of such outstanding growth and friendly interest rates that even plain vanilla home loans could produce fat customer growth numbers. Judging by how often he uses the words "innovation", "introduce" and "fundamental change", Furlong has a yen for making it new.

With nearly 150 years of history stretching back to its origins as the Workingman's Benefit Building Society in 1861, First Active has been in the mortgage game a long time. That tradition serves today as a foundation for fresh thinking, as Furlong tells it.

"Let me take you back a few years to when First Active introduced the splitterm mortgage. There was a lot of talk at the time about refinancing debt, " he says. "So we brought out a split-term mortgage so people could consolidate debt at home loan rates, but keep it over a shorter term rather than pay it over 30 years That was a much more realistic approach to servicing that debt."

H That was before Furlong's time, though. While First Active was carving out its split-term niche, he was still working his way through the senior ranks at Ulster Bank Group, First Active's parent, where he was instrumental in introducing the free switcher mortgage to the Irish market.

"Because I was in the retail structure I was influential in the way they grew the mortgage business, " he says. "I would have brought that kind of innovation to Ulster Bank and the market.

That's why I'm really looking forward to this job."

An auspicious convergence, then.

True to form, Furlong's first major move in his new role was to bring out the offset mortgage at the end of last year/beginning of this year - an upgrade of First Active's pioneering current account mortgage - which sets the money in the customer's First Active current and deposit accounts against the principal in the loan to reduce monthly interest payments.

"We try to be a little bit more holistic about the customer rather than just filling a niche - we get all your money working, " he says. "A mortgage is a big piece of people's lives. It's been interesting to take a view of how to do things a bit different rather than just doing what everyone else is doing."

The speed to market of the offset product after Furlong's arrival in his new role was made possible by First Active's back-end IT integration into the Royal Bank of Scotland group, which owns Ulster Bank. Where First Active once had to rely exclusively on its own internal resources, the integration with the global group opened up new avenues for development. Suddenly, best practice in other jurisdictions became part of the operating context.

"I can shop in RBS for any product that they have, " Furlong explains. "It's a global entity so I can get better access to other markets to see where the future is. Offset is a great example - we brought it in as soon as integration happened. It was a product we didn't have access to and couldn't provide before, so we jumped on it straight away."

And that's not the end of the innovation catalogue, either. First Active was also the first lender in Ireland to market a 100% mortgage for first-time buyers, a somewhat daring departure even at the bottom of the interest rate crater of 2005. But Furlong downplays the risk involved, insisting the firm applied - still applies - rigorous stress testing, even to borrowers who haven't raised a deposit. He points to a delinquency rate of "well below 1%" amid nearly two years of rate rises as a real-world vindication of the "small segment" at which the product is pitched.

Furlong still sees a "significant amount" of growth left in the mortgage market, too, despite talk of a cooldown, soft landing or whatever the metaphor du jour is at the moment. He points to an expected 82,000 house completions this year to shore up his bullish stance.

"You're going to see a lot more debt consolidation; if people aren't moving you'll see them consolidating. People are looking for better value - that's why I brought the free switcher into First Active."

With new competition in the market since the arrival of Halifax and others, lenders are looking for new segments to exploit - most recently in the sub-prime market, as mainstream mortgage players such as IIB and Permanent TSB have partnered with Lehman Brothers and Merrill Lynch, respectively, to bring mortgages to the tricky credit cases who don't make the grade for mainstream products. The margins are higher, but the risks are greater too. Right about now the American sub-prime market is unspooling with more than enough rope to hang US economy. Furlong doesn't sound tempted.

"There is genuine prudence in the market, " he says, refusing to take the line that Irish borrowers are grossly overextending their credit. "People are conscious of living within their means, especially with interest rates moving.

You don't see people going bankrupt here like you do in America."

He then makes a case for the growing sophistication of Irish savers. Although savings and investment spawns the smaller tributary of First Active's revenue stream, Furlong sees the area as a source of "a lot of new opportunity".

"Irish consumers are becoming aware that they have to make provisions for the future and they're going to have to look at different instruments to do it - managed funds property or whatever, " he says. "They're saying, 'I've got my great house, nice clothes fancy holidays, shopping in New York, now what?' The focus is going to change to the future."

This risk-taking Irish investor is evidently a rather new development in First Active's customer base, however.

Only five or six years ago, the company was selling a suite of tracker bonds to risk-averse savers who wanted capital guarantees but also some exposure to equity markets. Trading on an association with index-tracking funds, which invest directly in equities, the tracker bonds were basically deposit accounts with an stock option attached.

In almost all cases over the period from 2002 to 2006, however, the bonds actually underperformed ordinary deposits when fees and charges were taken into account. Sure, the capital was guaranteed, but the real value of the investment gradually eroded.

Although First Active still offers trackers, Furlong implies that their day in the sun is over.

"It was a market norm after the dotcom bust, " he explains. "They were set up when interest rates were extremely low and inflation was passing us by, so if you put money on deposit you were actually losing out. People wanted a positive option."

Now he sees customers taking a different attitude to capital guarantees and safety nets - "a step up from savers to investors" - encouraged by the savings habit instilled by five years of SSIAs and the success of property investment.

Furlong has been late to move on the SSIA market, having waited until only last week to launch an update of its elevator fixed deposit account in an effort to keep SSIA money within the organisation. He's betting that savers haven't yet decided what to do with their lump sums and, with 65% of accounts yet to mature, he wants First Active to be front of mind when they do. He thinks that, by positioning at the exit, he can retain a high percentage of those nest eggs.

"I'd rather be talking to customers when they have money than when they don't, " he says, and leans back in his chair.

CV

COLM FURLONG
Age: 41
Family: He is married to Denise and has three small children - Laura, Sophie and John
Background: managing director of First Active since the end of November 2006; joined Ulster Bank, First Active's parent, in 2001 and worked in several senior management positions, most recently as director of sales and service in the corporate markets division; prior to joining Ulster Bank he worked with Permanent TSB.
Interests: GAA (supports Dublin), golf and travel