Specialists and challenger banks lead lending growth

Specialists and challenger banks lead lending growth

Specialist lenders and challenger banks saw the most growth in gross mortgage lending last year, according to latest figures from UK Finance.

UK Finance yesterday (18 July) published its annual largest mortgage lenders data for 2017, showing a gross lending total of £257bn, amongst those of its members which provided data, an increase of four per cent on 2016 but less than the 11 per cent growth posted last year.

Although all types of lenders saw growth in their overall lending, UK Finance said it was the specialist lenders and challenger banks who led the way with almost a 20 per cent increase in activity.

Comparatively, the mainstream lenders saw slower growth - there was no movement in rankings in the top ten of the table, and although Lloyds’ lending activity increased seven per cent on 2016, Nationwide Building Society, Royal Bank of Scotland and Santander returned lower gross lending levels than they did in 2016.

Despite increased competition in the market, with 65 lenders featuring on the table compared with 60 the previous year, several lenders ranking in the 11-20 group had moved up the table.

Specialist lender Paragon jumped from rank 21 to 19 with an increase in lending activity of 78 per cent, while Legal and General moved from rank 27 to 23 following a 67 per cent increase in lending.

Specialist lenders, those providing alternative products such as bridging loans and complex buy-to-let offers, and challenger banks are relatively new by nature - putting them in a position of growth more likely to feature in the table's 21-30 tier, which ranks them based on their gross lending.

Lenders ranked 21-30 on the table lent £3bn more in 2017 than in the previous year, with the strongest growth in new lending at a rate of 40 per cent.

Callum Bilbe, an analyst at UK Finance, said 2017 was a good year for the mortgage market with gross lending continuing on an upward trend.

UK Finance’s most recent market forecasts predict a gross lending total of £260bn for 2018 -  an increase the trade association attributed to a stronger-than-expected remortgage activity.  

Steve Ellis, CEO at Legal & General Home Finance, said it was exciting to see challenger banks and specialist lenders continue to gain market share.

He said: "We are extremely proud to have reached the £1bn milestone, and our move up the mortgage lending table highlights a definite shift in attitudes to later life borrowing and the use of housing equity to support a good retirement.

"We firmly view later life lending as a part of the wider mainstream mortgage market, and whilst we might not be there just yet, we are getting ever closer."

Danny Belton, head of lender relationships at Legal & General Mortgage Club, said whilst high-street lenders still dominate the top spots, more and more borrowers are beginning to sit outside the traditional "vanilla" mould - and this is why specialist lenders and challenger banks are celebrating the biggest growth.