Latest figures show increasingly tough struggle as lenders slash interest rates
It’s not been a great year for Santander. In May, the Spanish-owned bank announced that it had been hacked, exposing the details of 30 million customers and staff. Profits have slumped, and now, new data shows that the bank is seeing a repeat of its experiences in 2013 when it saw its mortgage lending book drop by millions.
Santander hasn’t been idle – it was the first bank to cut rates after the Bank of England’s recent interest rate reduction, but the battle for a share of the mortgage lending landscape is heating up. A swathe of interest rate cuts are frothing through the market, as banks like HSBC close in on banks with larger market share.
UK mortgage lenders are jostling for position as the first signs of a recovery are showing in the housing market and in the greater economy and Santander is not alone in seeing its market share slip. Barclays has also lost its position as the country’s fourth largest home lender while trying to undertake what it calls strategic initiatives to stabilise its finances and streamline operations.
These have included the sale of its €5.3 billion Italian mortgage book, which, although resulting in a €260 million loss, aligns with the bank’s efforts to optimise its lending portfolio. Additionally, the acquisition of Tesco Bank’s retail banking business, expected to complete later this year, will bolster Barclays’ market position by adding approximately £400 million in annualised net interest income. Barclays managed to achieve significant efficiency gains, realising £0.4 billion in cost savings in the first half of 2024.
So how are the banks doing in the battle for market share?
UK Finance figures show Lloyds is still the undisputed leader of the mortgage lending pack at 16.40% of the UK mortgage market at the moment, although it has seen some slippage – its 2022 figures showed it had 0.4% more market share than during last year. One of the beneficiaries of that loss could be NatWest which has increased its market share by 0.10%, although one of the biggest movers has been HSBC, leapfrogging a slipping Barclays to fourth biggest by a 1.7%increase in share and coming within a whisper of overtaking third place Nationwide, which saw its share of home lending slip by 1.1%.
The biggest loser (of market share) however, is Santander, which has seen an 11.4% share slump to just 6.7%. If the bank had maintained its 2022 market share, it would have allowed it to claim to be the UK’s third biggest mortgage lender. Its 2023 results, however, leave it languishing in sixth.
“Right now we see a slight pick-up in demand [and] obviously pressure to compete for that increased demand,” José García Cantera, Santander’s chief financial officer told the FT. “But it looks like the worst in the mortgage market in the UK is behind us. We should gradually see an improvement both in volumes and in profitability.”
Figures from Rightmove show that the market that the banks are fighting for is also about to get a lot bigger – estate agents report that since August 1 enquires have shot up by nearly 20% - predicting a resurgence in clients looking for mortgage intermediaries to help them.
“As the summer holiday season comes to an end, the conditions are there for a more active autumn market,” said Tim Bannister, Rightmove’s director of property science. “The reaction from home-movers to what is hopefully only the first of several rate cuts over the next year or two, combined with other positive data and trends, has led us to raise our price prediction for the year.”
Estate agents Savills and rival Knight Frank are both predicting prices to rise this year (2.5% and 3% respectively), which should help improve buyer sentiment, and help drive mortgage borrowing demand.
"Now there has been a cut, demand and transaction activity will increase when the autumn market gets underway in September and more mortgage rates fall below the 4% psychological threshold,” said Tom Bill, head of UK residential research at Knight Frank.
It sounds like it’s time to make sure that you’re in contact with all your potential borrowing clients as the market warms up, and as the big mortgage lenders battle it out to give you great deals to offer.
