Mortgage market dominated by 'big six'

Mortgage market dominated by 'big six'

The “big six” high street banks continued to dominate the mortgage market in 2018 as they accounted for nearly 70 per cent of all mortgage lending.

UK Finance’s lending league tables for last year, published today (July 30), showed Lloyds Banking Group remained the largest lender with £42.5bn worth of gross lending and maintaining 15 per cent of the market share.

Nationwide Building Society was the second biggest lender accounting for 13.3 per cent of lending in the market, while RBS, Santander, Barclays and HSBC took between 11.4 per cent and 8 per cent of marketshare.

By comparison, Coventry Building Society, the next largest lender, accounted for 3.4 per cent of the market — less than half of HSBC’s share.

Combined, the “big six” provided nearly £12bn of new lending throughout the year, despite RBS and Barclays experiencing a dip in lending compared with the year before (£400m and £100m respectively).

Outside the top players, TSB saw its market share drop from 2.7 per cent in 2017 to 1.8 per cent in 2018 as its lending dropped 31 per cent from £7bn to £4.8bn.

This is likely due to its IT debacle which led to a Financial Conduct Authority investigation after 2m customers were locked out of their online banking services.

The findings also showed 2018 to be a good year for building societies, as Coventry and Yorkshire building societies grew their lending by £600m and £900m respectively.

Other lenders who experienced considerable lending growth included the now-embattled Metro Bank, which increased its market share by 0.4 per cent and its lending by £1.2bn, Sainsbury’s Bank, which grew its lending by £1bn, and Masthaven, which rose from the 70th biggest lender to the 45th from 2017 to 2018.

Top 20:

RankLenderRank changeLending £bn (2018)Market share (2018)Lending £bn (2017)Market share (2017)
7Coventry BS09.23.40%8.63.30%
8Yorkshire BS+18.73.20%7.83%
9Virgin Money-16.82.50%8.43.20%
14Skipton BS-24.21.50%4.31.70%
15Leeds BS-23.81.40%4.11.60%
16Bank of Ireland-13.31.20%3.21.20%
18Prinicipality BS01.90.70%1.90.70%
19Paragon Group01.60.60%1.60.60%
20Tesco Bank+21.40.50%1.10.40%

Big movers:

RankLenderRank changeLending £bn (2018)Market share (2018)Lending £bn (2017)Market share (2017)
27Vida Homeloans+70.80.30%0.40.20%
=45Ahli Untd Bank+70.20.10%0.10.00%
=45Hampshire Trust+70.20.10%0.10%
=56Secure Trust+140.10%0.10%

UK Finance also found growth in the number of lenders operating in the mortgage lending space over the past few years.

There were a total of 70 lenders in the trade body’s results for 2018, compared with 65 the year before and 60 lenders in 2016.

This could have impacted this year’s ‘mortgage price war’, where a competitive market has seen lenders cut rates and experience narrowed margins.

The low profit environment has seen challenger bank Tesco leave the market and Secure Trust pull the plug on mortgage lending.

The findings also showed strong annual growth for specialist and equity release lenders.

According to UK Finance, patterns of borrower incomes have become more complicated — driven in part by the growth in self-employment and an ageing population — which means lenders with bespoke or manual underwriting processes do well.

Source: UK Finance

Part of this sector is the later life market, which saw the highest proportion of growth compared to any other sector. The number of new loans to borrowers aged 55 or older has grown more than 50 per cent to 42,866 in 2018.

Source: UK Finance

UK Finance stated it was clear lenders were “attuned to the realities” of an ageing population and had innovated in the mortgage space to provide suitable products to the customer base.