Since then, we have seen a significant reduction in both gross and net lending. Consumers have found that access to mortgage credit is more restricted, and the problems associated with the credit crunch have been compounded by wider macroeconomic disruption. Gross lending totalled £261 billion in 2008, 28% lower than its peak of £364 billion in 2007.
The lending community itself has undergone equally dramatic changes. Today, we publish our table of the Largest Mortgage Lenders for 2008. The table is compiled principally from published accounts, and not all lenders publish data for a financial year finishing on 31 December. As a result, the figures for lenders in the table are not always directly comparable and need to be interpreted with some caution.
Typically, our table of the largest 30 lenders shows only a handful of changes from year to year. This year, however, it has a much less familiar look, showing just how much has changed in the last year or so.
Wholesale funding
Since autumn 2007, non deposit-taking specialist lenders have been unable to access wholesale markets or any of the government liquidity schemes. As a result, the specialist lending sector has been reduced to a fraction of its former size. In 2007, specialist lenders – excluding subsidiaries of UK mortgage banks and building societies – accounted for over 7% of gross lending. But in 2008, this share shrunk to 2% of a much reduced overall market total. In effect, many specialist lenders ceased new lending in 2008.
Banks and building societies have fared relatively better, although retail and wholesale funding has been restricted and more costly. Large and medium firms have also had the option of accessing the liquidity facilities made available by the Bank of England.
Despite this, however, banks and building societies have been severely affected by the credit crunch – both directly, as we have seen with some individual firms, and indirectly as a result of falling house prices, and the impact of deteriorating macroeconomic conditions on mortgage defaults and profitability. During 2008, some major retail banks were taken into full or partial state ownership.
Mergers and other changes
Additionally, there were no fewer than seven mergers and transfers of engagement in the mortgage market, as well as partial transfers of mortgage assets. The highest profile consolidations were in the banking sector, where HBOS and Lloyds TSB (including Cheltenham & Gloucester) the largest and third largest lenders in 2007, have merged into Lloyds Banking Group. And the second largest lender in 2007, Santander, having already acquired the Abbey brand, took over the Alliance & Leicester mortgage book last October.
In the building society sector, there were transfers of engagement, which saw the Cheshire and Derbyshire building societies merge into the Nationwide Building Society, and which brought together the Scarborough and Skipton, the Catholic and Chelsea, and the Barnsley and Yorkshire building societies.
As in previous years, our table also shows how the largest 30 lenders were ranked in the preceding year (2007). But in order to make comparison of figures for firms in 2008 and 2007 more meaningful, we have re-worked the data for the earlier year as if the merger and acquisitions activity that took place in 2008 had occurred earlier.
The largest lenders had been progressively shrinking in overall market share until the onset of the credit crunch – reflecting the diverse and much more competitive mortgage market, with many active firms, which we saw prior to 2007. But recent consolidation of firms has meant that the largest five lenders last year were responsible for almost three-quarters of all new lending.
With so many lenders either merging or ceasing lending, this year’s largest lenders’ table has changed more than in other years. For gross lending in the year, there are significant changes throughout the table. Some larger lenders, most particularly in the specialist sector, have dropped a number of places down the list or been replaced by names not seen in the list before.
While some specialist lenders remain in the list for last year, we would expect shrinkage of this sector to continue while current market conditions persist. Even if conditions in wholesale markets improve this year, the backwards looking nature of our largest lenders’ table means that we would expect next year’s data to show that the specialist lending sector has shrunk further. Meanwhile, the lending commitments from the nationalised and part-nationalised banks suggest yet more growth in market share for this sector. And, of course, we may not have seen the end of the current wave of consolidation. So, next year’s table is likely to look different again, with more new names and an even larger market share in the hands of the largest firms.
The top five lenders of 2008 by lending were:
1 (1) Lloyds Banking Group £78bn 30.3%
2 (2) Santander £35.2bn 13.7%
3 (3) Nationwide BS £29 bn 11.2%
4 (5) Barclays £22.9bn 8.9%
5 (6) Royal Bank of Scotland £18.7bn 7.3%
To view the table put the following link into your browser and press return: http://www.cml.org.uk/cml/filegrab/?ref=6520
