19
Aug
Fewer lenders dominate home loans
Six mortgage lenders increased their hold over the market for
new UK home loans in 2008, according to Council of Mortgage Lenders
(CML) data.
The top six, led by the Lloyds banking group, accounted for 78% of
all new loans, compared to 72% the year before.
The CML said the credit crunch, which started in 2007, had dried up
the supply of mortgage finance.
Overall new lending fell by 28% last year, with some specialist
lenders being driven out altogether.
"The lending community itself has undergone... dramatic changes,"
the CML said.
"With so many lenders either merging or ceasing lending, this
year's largest lenders' table has changed more than in other
years," it added.
Driven out
A key factor was Northern Rock dropping out of the top-ten mortgage
lenders as a result of its insolvency in 2007, when it accounted
for 8% of all new lending.
In 2008 it lent just 1.1% of new mortgage funds.
But the CML said another factor was that specialist lenders - those
which did not depend on savers' money to finance their lending -
had fallen from a 7% share of new lending to just 2%, and of a much
smaller market.
"In effect, many specialist lenders ceased new lending in 2008,"
the CML said.
Ray Boulger of mortgage brokers John Charcol, said borrowers were
now receiving the worst of all possible worlds.
"If you have fewer lenders you have less competition," he
said.
"Those lenders still in the market have only limited amounts to
lend, so they aren't competing hard with each other if borrowers
have less than a 25% deposit," he added.
After Lloyds, the biggest lenders in 2008 were Santander, the
Nationwide, Barclays, RBS and HSBC.
Mergers
Banks and building societies were also badly affected by the drying
up of funds from the wholesale banking markets.
House prices fell, undermining the value of their past loans, and
more borrowers defaulted on their mortgages because of the
recession.
One effect was a flurry of mergers and takeovers, with some of the
more financially troubled lenders having to be rescued by larger
operators.
Lloyds TSB took over HBOS, which meant that the first and third
largest lenders were combined.
And the Spanish bank Santander, which had already taken over the
Abbey, also took over the Alliance & Leicester.
Among building societies, the Nationwide took over both the
Cheshire and Derbyshire building societies, and there were mergers
between the Scarborough and Skipton, the Catholic and the Chelsea,
and the Barnsley and Yorkshire building societies.
"We may not have seen the end of the current wave of
consolidation," the CML warned.
"So, next year's table is likely to look different again, with more
new names and an even larger market share in the hands of the
largest firms," it added.