The UK mortgage market has been stronger in the first half of 2006 than most market commentators expected, with gross lending of £160bn, 27 per cent higher than in the same period in 2005, and estimated net mortgage lending of £49bn, 20 per cent higher. We now expect both gross and net lending in 2006 to be higher than in 2005.
Our mortgage business has maintained the momentum built in 2005, with net lending of £2.6bn, an estimated market share of 5.3 per cent. This was significantly higher than our share of mortgage balances, which at 30 June 2006 was an estimated 3.5 per cent. Gross mortgage lending was £6.4bn, 58 per cent higher than in the first half of 2005 and a 4.0 per cent share of the market. Mortgage redemptions in the first half of 2006 were £3.9bn, an estimated market share of 3.5 per cent.
This month we launched our first mortgage products for the buy-to-let, self-certification and near-prime segments of the market, under an agreement with Lehman Brothers. These products are distributed via mortgage intermediaries. A&L will process the applications using underwriting criteria developed with Lehman Brothers. Once completed, the mortgages are sold on to Lehman Brothers.
During the first half of 2006 we maintained a competitive range of mortgage products for both new and existing customers. Our share of the first-time buyer market continues to increase, and 44 per cent of our new lending was to this sector in the first half of 2006. These new customers provide a good opportunity for future cross sales and are typically more profitable than other mortgage customers. The increase in gross advances reflects increased sales through our own branch network and telephone operations, which together continue to generate over 30 per cent of new lending, as well as continued growth in intermediary generated business. The proportion of mortgage balances paying standard variable rate was 11 per cent at the end of June 2006 (December 2005: 14 per cent).
