4th September 2015
The Council of Mortgage Lenders has published its list of the 20 largest providers in 2014. The trade body’s James Tatch takes us through the findings…
As in previous years, we publish these rankings down to the point where there ceases to be clear water between large numbers of lenders all reporting the same rounded lending figure. For the year in question, this gives us a top 20 list of firms for both gross lending and balances outstanding – as it did for 2013.
Aggregate gross lending last year showed strong growth, rising by 14% to £203bn, excluding lending to housing associations, which the Bank of England has recently removed from its mortgage lending data. We are still a long way from the levels seen at the peak in 2007, when aggregate lending totalled £357bn, according to the revised Bank data.
Table 1: Largest mortgage lenders by gross lending (click to enlarge)
This year’s data continues to be boosted by government home-buyer initiatives and ultra low interest rates, which give a stimulus to the housing market that was not there before the credit crunch. Notwithstanding this, levels of activity and competition in the market in 2014 were looking more “normal” than we saw throughout the credit crunch.
With growth in lending both to home-buyers and to buy-to-let investors, there were opportunities for lenders in all sectors and, broadly speaking, firms of all shapes and sizes played their part.
Chart 1 shows how market concentration looks to have normalised in the past two or three years. In the run-up to the credit crunch, competition for business grew ever stronger and, as a result, the six largest lenders advanced a declining share of new business, accounting for around 60% of aggregate lending in 2007. During the financial crisis, however, the twin effects of lenders exiting the market and other firms merging caused this trend to reverse sharply, so that in 2009 86% of new business was advanced by the six largest lenders.
That heavy concentration has slowly abated in succeeding years, with smaller lenders once again writing a larger share of new mortgages. Last year, the six largest lenders accounted for 72% of activity, although this was little changed from 2013, while the second tier – those ranked from seventh to 20th in our list – accounted for 20%, again unchanged from 2013.
Chart 1: Gross lending market concentration
So, on the face of it, it looks a year of relative stability.
But there are always movements up and down the rankings, driven by lending opportunities and challenges, and different business and commercial plans. And last year was no exception. At the top, Santander saw a second successive year of strong growth – up 50% on 2013 – to regain second position on the list.
Overall, the six largest lenders saw growth in activity of a healthy 17%. But the lenders below this (those ranked seventh to 20th) saw much stronger growth – by 46% overall. Notable amongst these, four lenders experienced very significant growth in volumes, resulting in each moving a number of places up the gross lending table: Bank of Ireland doubled its lending in 2015, and OneSavings Bank (88%), Paragon (75%) and Clydesdale 61%) also saw strong increases in volume.
Table 2: Largest mortgage lenders by balances outstanding (click to enlarge)
Looking at mortgage balances outstanding (see Table 2), the scale of changes is much less pronounced. That is what we would expect, given that a sizeable increase (or decrease) in activity for an individual lender in any one year has less of an impact on the size of the firm’s outstanding stock of loans. So, although gross lending in 2014 was 14% higher than in the preceding year, the overall effect on balances outstanding was negligible, with the total mortgages assets of the largest 20 firms increasing from £1,159 billion to £1,171 billion, or by around 1%.
Our forecasts show a stable path for gross lending, which is expected to rise modestly to £209 billion this year before accelerating a little to £230 billion next year. A number of lenders’ interim results so far suggest that next year we are likely to be reporting a similar picture of lender growth and competition when we publish a complete list of the largest lenders for 2015.