Mixed results from mortgage lenders over lending levels

For a number of months the mortgage market in the UK has been struggling, having been plunged into chaos by the arrival of the global credit crunch, which swept across the nation last summer. Both larger and smaller lenders have been affected, although building society officials have claimed that they have not been as hard hit as the larger banks and financial institutions.

There have been many changes and many problems stemming from the global credit crunch. The main problem has been the fact that lenders have found it very difficult to secure funding at affordable rates and this means that they have had to make radical changes to their lending regulations.

The number of mortgages available on the market has fallen by two thirds since last summer, lending conditions have become far tighter making it more difficult for consumers to qualify for a mortgage, interest rates and associated charges have been rising, and lending levels have generally fallen through the floor.

This has affected both lenders and consumers, as well as other industry sectors, such as solicitors, furniture retailers, builders and construction workers, and others who have been hit by the slump in mortgage lending and property purchases. However, there are been mixed results over mortgage lending levels from a number of high street banks.

Abbey

Abbey is a Spanish owned bank, and recently reported that its market share in the mortgage sector had increased, despite the global credit crunch. Whilst other banks and lenders have been struggling to secure financial to fund their mortgage lending operations, thus leaving them unable to entertain the idea of increasing business significantly, Abbey’s Spanish origins meant that it was able to access the European Central Bank for funds.

With other banks unable to take on as much new business the Abbey has been able to take advantage of the situation, and as a result of increased business that it has been able to fund through its European links has enjoyed an increase in its market share in the mortgage sector. In the first quarter of this year the Abbey reported mortgage lending figures of £2.9 billion, which was more than double the figure for the same period last year. An official from the Abbey said: “Our market share is more than 15 percent which is more than our natural share because of the market conditions. We are selecting loans very carefully, altering our spreads and conditions.”

HSBC

Although the HSBC had been struggling along just like the other banks a recent new product launch has enabled the bank to reverse its fortunes. In April the bank launched a new mortgage products called the Rate Matcher mortgage, and this was a mortgage catering for those that were due to come off cheap fixed rate deals and needed to find an alternative to avoid being put on their lenders’ expensive standard variable rates. What the Rate Matcher mortgage offered was the chance to remortgage at the same rate as the cheap fixed rate mortgage that they were on. There were conditions attached, such as a 40% deposit. The offer was initially offered for a period of five weeks.

However, the Rate Matcher mortgage proved very popular, and as a result of this the bank recently announced that it was extending the offer once it had passed the initial five week period. Officials from the bank said that lending levels soared to four times the usual amount for the month, with the bank averaging around £100 million in mortgage sales each day and customers flocking to take up the deal. The bank’s share in the mortgage market went from around 3.6% to an estimated 12%.

Nationwide

Not all banks have enjoyed good fortune when it comes to increasing market shares in the mortgage sector, and one of the casualties of the effects of the global credit crunch has been Nationwide, which has reported a 40% drop in mortgage lending levels for the last financial year. At the end of the financial year this April mortgage lending figures reported by the building society were £6.7 billion, which was a steep fall from the previous financial year when lending levels stood at £11.2 billion, reflecting a 40% drop.

The building society stated that the drop in lending levels had occurred due to difficult market conditions stemming from the global credit crunch, which had made it difficult to secure lending to fund mortgage operations.

An official from the building society said that this situation was affecting both consumers and lenders, adding: “The society is conscious of the difficulties faced by consumers in these disrupted market conditions and we are playing our part to help by continuing to focus on offering mortgages that meet the needs of both existing members and first-time homebuyers.”