2011 gross lending prediction at risk
Santander reported a 21% decrease in gross lending between the first half of 2010 and H1 2011, a fall in £2.6bn. Barclays reported £7.6bn in gross mortgage lending for the first half of 2011, down on the £8.5bn it did in the first six months of 2010, a 10.6% decrease.
Northern Rock reported gross mortgage lending of £1.5bn, down 25% from the £2bn reported in the first half of 2011.
The Council of Mortgage Lenders revised its gross mortgage lending forecast in June from £135 to £140bn for the year which the Association of Mortgage Intermediaries deemed as “unlikely to be achievable”. Mortgage Introducer spoke to various sources on whether the CML, in light of recent half-year results, would downgrade their forecast or remain true to their current prediction.
A spokeswoman at Barclays, said: “Despite experiencing a decrease in gross mortgage lending for H1 2011, our figures remain on plan and significantly above our stock share. H1 2011 saw the return of more lenders and aggressive competition in the market which has impacted lending figures.
“The CML’s figures may have been slightly optimistic due to the stagnant economy and lack of base rate movement so far this year. As this is now expected to continue throughout 2011, Barclays expects gross mortgage lending for 2011 to be broadly in line with that of 2010.”
David Sheppard, managing director of Perception Finance, said: “On the basis that the market has had a bounce in the last month and a half, the CML will look to hold steady on their forecast for now.
“Primarily of course the forecast is lending over the course of the whole year and not just a couple of months. Whilst there might be some lenders where the lending volumes have declined, there are also going to be lenders where their lending volumes have increased within that time frame.
“Of course Santander was a very heavy player in the past year. If you’re comparing like for like with the lenders now in the market and being more aggressive, Santander and Barclays’ volumes are clearly going to go down whereas other lenders want a larger piece of the pie than they had before.
“There’s more competition now for that business. Even on our own figures, last year a very high percentage of all mortgage lending was placed with Santander, whereas this year it has been more balanced across all lenders. And, if anything, Santander has actually slipped down the order a little bit because of the fact that there are other lenders who want to compete more.
“Another factor is that Santander isn’t really in the buy-to-let market which is another part of the market which has enhanced of late.
“While Barclays does buy-to-let mortgages, it is not overly competitive in that regard. So where buy-to-let is showing some recovery, those lenders that aren’t in that market will also see their percentages drop.”
Alex Hammond, spokesman for Kensington, said: “Coming out of the banking crisis we saw a very small number of very large mortgage lenders completely dominating the market. Now as funding has been returning to smaller lenders like Kensington there’s new opportunity for intermediaries to access different types of products for different types of clients.
“Given that remortgaging is relatively flat and home purchase is still struggling, it’s fair to say the market isn’t growing. So it is only natural that new lenders, who are offering something different and providing new opportunities for intermediaries, will grow their market share. This obviously will eat into the very extensive market share of the behemoth lenders which emerged from the banking crisis.”
Commenting on whether the CML would revise its figures, Hammond said: “The trouble is that it’s difficult to speculate. The larger lenders were so large and controlled so much of the market – and still do. To suggest that the smaller lenders can make up any deficit those larger lenders are reporting would be a very significant claim.
“While smaller lenders are eating into those market shares, perhaps the market isn’t as large as the CML had predicted it would be this year as well. It’s difficult to speculate on what the CML would say, but to suggest that it’s purely down to smaller lenders eating into the larger lenders’ market share is probably a big boast.”
A spokesman at the CML said: “We will continue to monitor our forecast and adjust it when we think it’s necessary. We’ve revised it as recently as June so we’ll continue to monitor developments but have no specific plans to publish a new forecast at this stage. There isn’t a fixed period when we will make a reforecast.”
Lea Karasavvas, managing director at Prolific Mortgage Finance, said: “The headline of Santander 21% down on gross lending does make for fantastic reading but there are definitely factors behind this statistic that need to be taken into consideration.
“For instance the pipelines that both Santander and Barclays would have carried into 2011 would have been significantly less than the previous year due to the cost of borrowing and the rates that were on offer at the time.
“As is often the case, some lenders push for market share and this was evident during this period from HSBC which has increased its borrowing by 35% in the same period to £6.7bn. Additionally there was a dramatic change on the stance of interest only mortgages which would also have had an impact.
“However, I would not expect these stats to remain the same for the second half and would expect to see considerable increases in H2. Rates have become a lot more attractive from both Santander and Barclays, and the launch of the “one week only” deals from Santander in particular will have made a significant impact on its market share in many instances beating the likes of HSBC which has now eased up a little on its pricing given the share it gained in H1.
“There was also a big push from the Yorkshire group with incredible deals that would have plugged the gap. For intermediaries, over H1 and even more so now, it has been difficult to ignore the innovative pricing of Accord which has been very strong in the 5-year market.
“So whilst Santander and Barclays lost ground in H1, I would expect to see them stealing a lot of it back in the second half of the year if they continue to price with the aggression they have shown of late.
“As we have been saying, lenders have been down on their targets and that is why the competition with rates at present is so apparent. Whilst this competition to regain market share, and balance the books continues, this will ultimately benefit the borrower considerably.”