Healthy competition: the lending landscape in 2012
Published: 28 August 2013 | Author: Bernard Clarke
Editor’s note: Since this article was first published, there have been modest changes to both tables, reflecting changes in the data submitted to us by Barclays and Virgin Money. The changes for Barclays stem from the acquisitions of ING Direct and Standard Life. Data for both 2011 and 2012 now show lending by Standard Life fully integrated into Barclays’ figures. For both years, lending by ING Direct is shown separately from Barclays.
The changes for Virgin Money reflect a revision to 2011 gross lending figures, so that this is now consistent with gross lending as reported by other lenders in the table.
We have also made small changes to the text of the original article, reflecting the modified tables.
Today, we publish our data showing the largest mortgage lenders in 2012. Overall, gross lending last year barely grew (£130 billion compared to £129 billion in 2011). But this masks some major movements seen for lenders of all sizes.
Ever since the onset of the financial crisis – and exacerbated by the wave of market consolidations that followed – the lion’s share of lending has been concentrated heavily amongst the six largest lenders. But whilst this was still the case in 2012, the top six's combined share of 77.2% was substantially down on the 80.4% seen in 2011, and is in fact lower than at any point since the height of market activity back in 2007 (see Chart One).
Competition in the market is growing, bringing with it benefits to consumers shopping around for the mortgage deal to best suit their needs.
Chart One: Largest six lenders' share of gross lending
The six largest lenders as a whole reduced their lending in absolute terms as well, falling from £114 billion in 2011 to £111 billion last year. But this disguises substantial movement amongst the individual players; both Nationwide and HSBC strongly grew their lending (by 24%), Barclays expanded by 3%, whilst the other three all shrank their new business volumes – most significantly Santander, which saw a planned contraction in gross lending of 38%.
As a result, although the top six names are all still the same, the individual rankings have seen something of a reshuffle. Nationwide and HSBC climbed to become the second and fourth highest volume lenders respectively last year. Santander, consistently number two in the gross lending table since 2005, moved into fifth place.
There was plenty of healthy growth to be seen outside the top six too, as shown in detail in Table One. This growth comes both from long-established lenders – including the Coventry Building Society, which grew by 26% to become the seventh largest lender in the UK last year – and new names to the industry, for example Tesco Bank, which lent £300 million in the year, placing them at joint 21st. In fact, outside the top six, 15 of the 18 other lenders shown in Table One significantly grew their mortgage lending in 2012, against a backdrop of an industry total which barely moved.
Table One: Largest mortgage lenders by gross lending
The mutual sector also grew as a whole. Even after removing the substantial growth seen by the UK’s largest building society, Nationwide, other mutuals shown in the table grew in share by a combined 2%. Overall, mutuals in the top 21 accounted for 27% of total gross lending, up from 22% in 2011.
As in previous years, the lending totals in our tables are rounded to the nearest £100 million. Below the largest 21 lenders, there remains a significant clustering of firms on this rounded basis, with 16 further lenders reporting rounded total lending of £0.1 or £0.2 billion. As such, these rankings would not be particularly meaningful, but would be very sensitive to even very modest revisions in individual reported data. We will continue to present this table only to the level where results are both robust and meaningful.
Table Two: Largest mortgage lenders by balances outstanding
Looking at the data on balances outstanding (see Table Two) there is, as in most years, very little movement. Although total balances overall grew modestly, the combined share of the outstanding mortgage books – both for the six largest lenders and the entire top 21 shown in the table – shrank a little. In total, the largest 21 mortgage books accounted for 91.4% of total balances outstanding in 2012, down from 92.6% in 2011.