Uk Mortgages 2010: Competitive Dynamics In The Uk Mortgage Market - Market Research Report

Introduction

Introduction

The mortgage market continues to face challenging conditions in 2010, but there are signs that the situation is slowly recovering. Although lending volumes remain very low compared to before the crisis, product availability and affordability are improving. Some providers have been able to exploit their relative financial strength to significantly increase market share.

Scope

*Provides an overview of the general market, looking at trends in gross and net lending.

*Examines in detail the performance of lender types and specific providers relative to one another.

*Analyses current trends in the availability of mortgage products, as well as assessing movements in fees and rates.

Highlights

Banks are performing better than other lenders, with their share of gross lending rising from 68% in 2007 to 83% in 2009. Santander and HSBC have exploited their strength relative to other banks to significantly expand their share of lending. Specialists share of the market fell from 17% in 2007 to just 4% in 2009 as wholesale funding collapsed.

Building societies have found conditions particularly difficult. Compensation scheme levies, deposit outflows, stricter liquidity requirements and narrowing margins have impaired their profitability and ability to lend. Many building societies have been forced to merge to safeguard their future.

Product availability is improving, rates are starting to fall and maximum LTVs are gradually increasing. A few lenders are now offering 95% LTV loans. Other providers, such as Nationwide and Lloyds TSB, are offering preferential deals to their current account customers to promote loyalty and cross-sales.

Reasons to Purchase

*Understand the key issues driving changes in the competitive landscape.

*Discover why some lenders are outperforming the rest of the market while others are struggling.

*Learn about the latest developments in product attributes and innovation.

Table of Contents :

Overview 1

Catalyst 1

Summary 1

Executive Summary 2

Changes in market share reflect the contrasting fortunes of the leading lenders 2

Santander and HSBC have exploited their competitive advantages to capture market share 2

LBG is the only major lender to have suffered a fall in market share 2

Nationwide and Barclays just managed to hold their own in 2009 2

The top six lenders collectively increased their dominance of the market 3

Building societies have come under intense pressure over the last 12 months 3

Many building societies have been forced to merge to safeguard their position 3

The availability and cost of mortgages is gradually starting to recover 4

The overall number of available products has doubled since June 2009 4

TABLE OF CONTENTS 6

TABLE OF FIGURES 7

Table of tables 8

Market Overview 9

Changes in market share reflect the contrasting fortunes of the leading lenders 9

Santander and HSBC have exploited their competitive advantages to capture market share 9

LBG is the only major lender to have suffered a fall in market share 9

Nationwide and Barclays just managed to hold their own in 2009 9

The top six lenders collectively increased their dominance of the market 10

Growth in outstanding balances has come to a virtual halt 10

Few lenders experienced notable rises in value of their mortgage books in 2009 10

Banks mortgage books grew while those of building societies and specialist lenders shrank 11

Banks have strengthened their dominance of the mortgage market 12

State intervention in the funding markets has handed the banks a competitive advantage 12

Mergers and acquisitions have increased the power of the largest banks 13

The forced break-up of the largest banking groups may not be enough to restore balance 13

Bank profits are starting to recover as the crisis unwinds 13

The ability of building societies to lend has been hampered by market conditions 14

Building societies have been affected by several different events 14

There has been lower take-up of Treasury and Bank of England support schemes by mutuals 14

Building societies are finding it difficult to compete with banks for retail deposits 14

Costs of financing the Financial Services Compensation Scheme fall most heavily on building societies 16

Regulatory proposals by the Financial Services Authority may further disadvantage building societies 16

Building societies have fewer funding options open to them 16

Building societies have lost out to banks in the fight for new business 17

Specialist lenders have endured a sudden collapse after several years of rapid expansion 18

The lack of wholesale funding has virtually wiped out specialist lenders 18

The authorities have decided to restrict the activities of specialist lenders 19

Lender Developments 20

The leading providers all witnessed falls in gross lending in 2009 20

LBG suffered the largest absolute and relative decline in gross lending 20

Santander has capitalized on its ability to attract retail deposits 20

The relative fall in gross lending at RBS was the lowest of all the major providers in 2009 20

HSBC also managed to maintain gross lending almost unchanged 21

A focus on direct sales helps HSBC to compete aggressively on price 21

Lending at Nationwide has held up well despite the pressures it has been facing 21

Building societies have come under intense pressure over the last 12 months 22

Many building societies have been forced to merge to safeguard their position 22

Concerns have been raised over the financial stability of some building societies 24

Several building societies have raised their standard variable rates in recent months 24

Other small lenders are likely to follow suit 25

Kent Reliance has turned to private equity for additional funding 25

A few building societies are managing to outperform their peers 25

YBS is aiming to double gross lending in 2010 25

Coventry Building Society has increased both profits and market share 26

Specialist lenders are beginning to re-enter the market 26

Private equity investment and greater wholesale funding are facilitating the return of specialists 26

The buy-to-let market could be partially revived by a mismatch on RMBS pricing 27

Specialist lending is unlikely to capture as large a share of the market as it had before the crisis 27

Buy-to-let lending still faces a challenging future 28

The emergence of new providers could lead to greater competition 28

Aldermore operates under a traditional model 29

Metro Bank will focus on service rather than price 29

Tesco Bank will start offering mortgages by within the next few months 29

Other providers are also about to enter the fray 30

Product Developments 31

The availability and cost of mortgages is gradually starting to recover 31

The overall number of available products has doubled since June 2009 31

Higher LTV mortgages have started to re-emerge 32

Lloyds TSB is catering for borrowers who require mortgages up to 95% LTV 34

Other providers have expanded their presence in the high LTV market 35

Building societies are finding it easier to make an impact in the high, rather than low, LTV market 35

Mortgages are starting to come down in price 35

Margins have been narrowing since late 2009 37

Some lenders have cut upfront arrangement fees in an effort to increase new business levels 38

Most SVRs are likely to remain at or close to their current low levels 39

Mortgage providers are once again starting to innovate 39

Some lenders now allow borrowers to combine fixed and variable rates in one mortgage 39

HSBC offers a fixed/variable rate Split Loan Mortgage 39

Co-operative/ Britannia now lets customers mix and match across its variable and fixed rate deals 40

Other lenders are offering new interest rate-related features to combat uncertainty 41

John Charcol has introduced a facility for borrowers to cap their mortgage rates 41

Yorkshire Building Society lets borrowers on their final mortgages annually renew their fixed rates 42

Most innovation is coming from smaller lenders at present 42

Providers are using mortgages to promote loyalty and cross-sales 42

Santander has successfully increased current account openings on the back of its mortgage book 43

Nationwide is encouraging current account usage by offering exclusive mortgage deals to account holders 43

LBG uses mortgages in its approach to increase cross-sales among its customers 44

APPENDIX 46

Supplementary data 46

Definitions 57

Bank of England base rate 57

Gross advances 57

Residential mortgage-backed securities (RMBS) 57

LIBOR 57

Methodology 58

Further reading 58

Ask the analyst 58

Datamonitor consulting 58

Disclaimer 58

For more information please visit :

http://www.aarkstore.com/reports/UK-Mortgages-2010-Competitive-Dynamics-in-the-UK-Mortgage-Market-62622.html

by: Aarkstore Enterprise

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