Experts warn more lenders could exit the market

Michael Lloyd

July 11, 2019

More lenders could exit the market within the next 12 months, experts have warned.

Tony Ward (pictured), chief executive of Home Funding and director of Fortrum and Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, both agreed this is likely to happen due to how competitive the industry is.

They were speaking at the Westminster Business Forum Keynote Seminar about ‘‘The UK mortgage market – sector growth, regulating lending practices and the future for ‘Help to Buy’’.

Ward said: “In 2007 we had 100 mortgage lenders and today we have 150. We have more mortgage lenders today than ever before.

“But growth in recent years in mortgage lending has been fuelled by cheap and heavy subsidised funding through the Bank of England for lending and liquidity.

“It was necessary to inject liquidity into the market, but it’s allowed banks and building societies to lend at heavily subsidised rates at very low margins.

“The fact we have more lenders than the heady days of 2007 is not a good sign. Of the £275bn gross lending seen in the market this year, around 70% of that lending will be done by six lenders.

“That gives excess of 130 lenders scrambling around for about £27bn of lending. That’s why we’ve seen the likes of Secure Trust Bank and Tesco pull out. It’s an overpopulated market and should expect to see more of it.”

Sinclair agreed, saying we have too many lenders, more than the height of the massive boom in 2006-2007.

He added: “We will see more exit the market over the next 12 to 18 months as they can’t get the rate of return they want.”

Paul Broadhead, head of mortgage policy at the Building Societies Association (BSA), said: “I think competition in the mortgage market is incredibly intense. We may way see more come out of the market where the climate of uncertainty continues to wash through.”

Ward said tighter regulation should stop a 2007 type of crash. However he said a number of borrowers are falling out of the system as they repay their loans and go into retirement.

He added: “The market is not growing in real terms. I’d argue the market has peaked and is in long-term decline.”

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