News Review: Housing


How to reverse the current lending trend


by Stephen Smith, director housing and external affairs, Legal & General


it has been one of the accepted pieces of wisdom over the last few years that more and more lending has been concentrated amongst fewer and fewer market players. But is that trend starting to turn? and, if so, how much further might we see it go?


Real data is key the Legal & general network and its mortgage club serve a very wide market, now accounting for around 17% of all intermediary lending – so the data set that we have on who is lending what gives us a good, statistically meaningful picture of what has been going on in the marketplace. We are only looking at intermediary lending here, rather than the whole market. We have looked at our


lending split over the last five years, and have looked at the share taken by our top six lenders, and “the rest”. 2006 was probably one of the years when we had the most competitive and diverse of mortgage markets, and at that time, the top six took almost exactly 60% of completions, with “the rest” accounting for


the remaining 40%. But over the next few years, the top six increased their share to a peak of 73.5% before falling back last year to 69.5% these figures exclude


HSBc as it does not do business through intermediaries, so its spectacular growth in market share, now into double figures should be added to these “top six” figures to get an overall mortgage market comparison. But the overall picture


shows that perhaps the corner has been turned and we may see this concentration changing. of course the overall level


of mortgage lending has plummeted over the last four years. the peak year for gross lending was 2007, with a total of £362bn. this fell to £143bn in 2009, then a low of £136bn in 2010 before, we hope, recovering to the £140bn predicted by the cmL for 2011. it is not just the mortgage


market that has been starved of lending. the small and medium sized enterprise sector, have been vociferous in saying that not enough lending has been made available by banks in recent years. this government and the previous administration sought to address this issue by extracting lending promises from the banks, particularly the state-


owned banks, as to what they would make available to Smes and to mortgage borrowers. However, “Project merlin”, the project set up to negotiate lending promises from the banks, was far from magical for the mortgage sector. unlike the previous two years, no promises were given for mortgage lending explicitly and there has been no official explanation given for this omission.


The Lion that didn’t roar in an effort to address the issue of lack of supply of mortgage funding we at Legal & general network launched a project in 2009 called Project Lion. this aimed to contact a number of feasible new entrant lenders


Fast-building a reputation as the home for BTL.


Whatever the Bank of England’s decision on base rates. Aldermore has it covered with a full range of variable and fixed BTL mortgages. And as you’d expect, all our products are based on refreshingly sensible underwriting rules and criteria


To find out more call 0333 321 1000 mortgage introducer AUGUST 2011 11


and ask to work with them to enter the uK market. We contacted around 60 uK and overseas institutions and tried to persuade them that now was the time to enter or re-enter the uK mortgage market. the result was nearly all


the institutions we spoke to agreed it was a good time to enter or re-enter the market. But they did not feel courageous enough to do it. even if there had been


takers, it would have been quite a wait before we would have seen a new bank launch. the path back to a fully functional, competitive and vibrant market could be steep and slow and the trend could reverse if we enter a second volume downturn due to current world events.


aldermore-mortgages.co.uk


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