Abbey crowned king of mortgage lending
Abbey has knocked Halifax off the top spot as the UK’s largest mortgage lender, after its Spanish owner Santander revealed the bank now writes one in every four new mortgages.
Despite the onslaught of the credit crunch hitting mortgage lenders hard for nearly 12 months now, Abbey has increased its presence in the market from an average of 8% in 2007 to 26% in the first six months of this year. This knocks Halifax off the top spot as the UK's biggest lender, with the banking group boasting just over 20% of the market in 2006.
And Abbey’s domination of the mortgage market is likely to continue if its planned merger with Alliance & Leicester goes ahead. Earlier this month, Santander announced it had made a bid for the rival high street bank, and would bring the two brands together to create a super lender. However, Santander has announced its intention to trim the combined mortgage books of the two lenders.
Abbey’s gain in market share is largely the result of other big banks - such as Halifax and Northern Rock - restricting new lending, and to a lesser extent also reflects the absence of several players who have gone under as a result of the credit crunch.
However, Abbey has increased its lending activity with specific focus on retaining existing customers. Unlike many other lenders, Abbey only relies on wholesale funding for 10% of its lending activity, so it has not been hit by the credit crunch in the same way that other firms have.
Santander’s financial results also show a 135% increase in Abbey credit card sales, and a 50% rise in cash deposits to £2,884 million. In addition, current account customers are likely to get a boost from the news that Abbey intends to “develop” this area of its business, seeing the current account relationship as a “key driver of a customer’s overall experience” with a bank.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.