Lloyds named largest lender
Lloyds Banking Group has been named the UK’s biggest mortgage lender, closely followed by Santander and Nationwide.
Following several banks joining forces to weather the credit crunch, and specialist lenders going bust, it now appears that just a handful of lenders are keeping us in mortgage loans.
Lloyds, Santander and Nationwide, as the top three lenders, together controlled 55% of the market in 2008 and collectively approved £142.2 billion of mortgages.
And the top six firms (full list below) last year accounted for 78% of all new home loans. The Council of Mortgage Lenders (CML), which compiled the list, says the main players within the mortgage market have changed dramatically since 2007, as a result of the lack of funding for banks, the banking crisis and several firms disappearing.
Smaller banks and building societies have moved up the list as a result of the changes, with the likes of Yorkshire and Clydesdale banks moving from 15th largest in 2007 to ninth largest last year.
Northern Rock, meanwhile, has moved from the fourth biggest lender in 2007 to the 11th biggest, while HSBC – which has only recently taken a serious interest in mortgage lending – jumped two spots to become the sixth largest mortgage lender. The global banking giant is likely to have gained an even larger market share so far in 2009.
Overall new lending fell by 28% last year; gross lending totalled just £261 billion, well below its peak of £364 billion in 2007.
Bernard Clarke, spokesman for the CML, says: “Typically, our table of the largest 30 lenders shows only a handful of changes from year to year. This year, however, it has a much less familiar look, showing just how much has changed in the last year or so.”
The lack of wholesale funding for lenders has had a dramatic impact on specialist players, which typically lent sub-prime, buy-to-let and self-certification loans through brokers rather than directly to borrowers. In 2007, these types of lenders accounted for more than 7% of gross lending, but their share has now shrunk to just 2%.
HBOS, the banking group consisting of Halifax and Bank of Scotland, has in previous years taken the top spot in the CML’s table of the 30 top lenders. Its merger with Lloyds’ TSB has seen the latter bank move from second positive (with Cheltenham & Gloucester) and third position to dominate the top spot.
Santander is also a relatively new name to the list, although its UK banks – Abbey and Alliance & Leicester – have long had a high profile in the list.
To make the comparison between 2008 and 2007 more meaningful, the CML says it has had to rework the figures as if the merger and acquisitions activity that took place in 2008 had occurred earlier.
Going forward, the CML expects 2009’s figures to show even more changes, with more names moving up and down the ranks, and an even larger market share in the hands of the largest firms.
“While some specialist lenders remain in the list for last year, we would expect shrinkage of this sector to continue while current market conditions persist,” says Clarke. “Meanwhile, the lending commitments from the nationalised and part-nationalised banks suggest yet more growth in market share for this sector. And, of course, we may not have seen the end of the current wave of consolidation.”
Top 30 lenders: gross mortgage lending
|1 / 1||Lloyds Banking Group||30.3%|
|2 / 2||Santander||13.7%|
|3 / 3||Nationwide||11.2%|
|4 / 5||Barclays||8.9%|
|5 / 6||Royal Bank of Scotland||7.3%|
|6 / 8||HSBC||6.7%|
|7 / 10||Bank of Ireland||3.6%|
|8 / 7||Bradford & Bingley||2.3%|
|9 / 15||Clydesdale & Yorkshire Banks||1.3%|
|10 / 14||Coventry Building Society||1.2%|
|11 / 4||Northern Rock||1.1%|
|12 / 13||Yorkshire Building Society||1%|
|13 / 12||GE Money Home Lending||0.9%|
|14 / 11||Britannia Building Society||0.9%|
|15 / 19||Chelsea Building Society||0.6%|
|16 / 19||Skipton Building Society||0.5%|
|17 / 25||Co-operative Bank||0.5%|
|18 / 21||Leeds Building Society||0.4%|
|19 / 23||Principality Building Society||0.4%|
|20 / 17||Standard Life Bank||0.4%|
|21 / 20||CHL Mortgages||0.4%|
|22 / 15||Paragon Mortgages||0.3%|
|23 / 24||Norwich & Peterborough
|24 / 25||Newcastle Building Society||0.2%|
|25 / 9||GMAC-RFC||0.2%|
|26 / 21||West Bromwich Building Society||0.2%|
|27 / 27||Nottingham Building Society||0.1%|
|28 / 30||Beacon Homeloans||0.1%|
|29 / 29||Ulster Bank||0.1%|
|30 / 28||Stroud & Swindon Building Society||0.1%|
|Source: The Council of Mortgage Lenders|
All sub-prime financial products are aimed at borrowers with patchy credit histories and the term typically refers to mortgage candidates, though any form of credit offered to people who have had problems with debt repayment is classed as sub-prime. Depending on the lender’s own criteria, sub-prime can apply to borrowers who have missed a few credit card or loan repayments to people who have major debt problems and county court judgments (CCJ) against their name. To reflect the extra risk in lending to people who have struggled in the past, rates on sub-prime deals are typically higher than for “prime” borrowers.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.