For those buyers looking to purchase a new residential property in the UK it is increasingly likely that you will not choose one of the Big 6 lending institutions that have traditionally dominated this sector. According to the Council of Mortgage Lenders (CML) in 2012 these are Lloyds Banking Group, Nationwide, Barclays, HSBC, the Royal Bank of Scotland and Santander in descending order with Lloyds lending £26 billion and Santander £14 billion after reducing its lending by 38 per cent.
However, what is now happening in this competitive market is that a number of "mid-range" lenders are gradually increasing their share of the mortgage market, and, in particular, some of the leading building societies. Maybe the major banks are no longer the best place to go for a competitive deal on your next mortgage? But should we be concerned that the major banks are not growing their mortgage lending; is this healthy for the market as a whole? The UK government's Funding for Lending scheme should be resolving this problem as should the Help to Buy scheme which is designed to encourage banks to start lending more.
The"mid-range" lending institutions on the other hand have not only increased their market share but are also lending more than in previous years. According to the Building Societies Association gross mortgage lending by building societies and other mutual lenders increased by 30% during 2012 to over £30 billion. The Yorkshire, Coventry, Leeds and Skipton building societies, Northern Rock and Clydesdale bank are amongst those lending institutions taking business from the dominant Big 6. These, and other, mid-range lenders have taken advantage of the plight of the larger banks to increase their share of the mortgage market over the last few years. Competitive deals and careful lending practices have helped some of the smaller lenders to expand their loan books.
However, one of the Big 6 that has not suffered at the hands of its smaller competitors is the Nationwide, which is being viewed as a success story in the mortgage sector in the aftermath of the economic crisis. In the year to April 2013 it increased its share of the mortgage market to over £21 billion; a rise of over 15 per cent that puts it second after only Lloyds as the country's largest mortgage lender.
Council of Mortgage Lenders (CML) figures show that ING Direct and the Co-Operative Group are also growing albeit in in relative terms and it appears that days of the large players dominating the mortgage market appear to be coming to an end. Certainly when it comes to large mortgages (typically a million pound mortgage or more) many brokers are increasingly turning to lenders such as private banks as well as some of the mid-range banks and mutual lender that provide not only competitive interest rates but also underwriting flexibility that does not engage in the purely tick-box exercise when assessing a client ability to pay the interest on their large mortgage.