The recent annual ranking of mortgage lenders showed one main thing – that on the whole, not much has changed. In a market that seems to be crying out for change, new solutions and innovation, perhaps a shake-up of the competitive landscape is one way to do this. Perhaps?
Residential lending
In the residential gross lending table, one thing that struck me instantly as rather spooky, was the combined market share of the Top 6 lenders. This was a whopping 71.7%. But this is exactly the same as 2021 figure. Exactly the same. How bizarre is that?
In the Top 10 residential lenders group, six of them actually lost a bit of market share, whilst NatWest, Nationwide, Virgin Money and Santander gained share. Nonetheless, it is the same old faces in that Top 10.
Below the top 10, it is Skipton and Leeds BS who are closest to this group. As we begin to go down the table, there is a huge number of lenders fighting their way for a combined market share of 13% – or the equivalent lending of that of NatWest. This is perhaps why commentators often speculate that market consolidation will occur.
Buy-to-let lending
In the BTL table, as mentioned, NatWest more than doubled their market share to put some real pressure on the buy to let brands of Lloyds and Nationwide. Yorkshire Building Society entered the Top 10 of buy to let lenders, with Foundation dropping out. Below the Top 10, Aldermore stood out by growing their market share considerably. It will be interesting to see how 2023 could reshape the buy to let tables.
Does this matter?
Given the current mortgage market, there are a lot of voices suggesting change is needed. There are lots of ways to do this, a lot. But perhaps a market where 71.7% of residential business is commanded by six lenders is not actually that healthy. It leads to continued service challenges, stress amongst staff, brokers and consumers.
But who can compete with the big lenders’ cost of funds?
Well perhaps that is where the market could do with a change. Make cheaper finding available to more lenders. Let competition be on areas other than price. This could lead to greater choice and perhaps better consumer outcomes.
I know, I know. This is easier said than done. But I am just throwing the thought out there.
Buy to Let is a bit different and whilst funding costs do matter, I do think that this sector is really open to some clever product innovation which will accelerate market share growth. Let’s see who takes advantage of this.
Jeff Knight is director at the Mortgage Marketing Forum
