Lloyds Banking Group’s profits plunged by 28% in early 2024 as competition grew for mortgages and deposits.
Lloyds said its margins had been hit “mainly within UK mortgages” amid heightened competition between lenders to offer squeezed buyers better deals.
Total lending by the banking group, which also includes Halifax and Bank of Scotland, was down £1.2bn during the quarter.
This was driven by lower mortgage lending, as more homeowners chose to refinance their mortgage deal at the start of the year than at the end of 2024 when there was more economic uncertainty.
It came as competition has stepped up among UK lenders to offer customers better deals amid a period of historically high rates.
But, since the end of the quarter, Lloyds has seen an increase in the volume of mortgage applications, which it expects to result in greater lending through the year.
Newspage asked mortgage brokers for their views on Lloyds Banking Group’s profit news.
Reaction:
Richard Jennings CeMAP, founder and managing director at Richard Jennings Mortgage Services:
“These results do not come as a surprise. Halifax, the biggest lending arm of Lloyds Banking Group have always focused heavily on new mortgages for movers and first time buyers.
“This segment of the market has been stagnant at best, dead at worst for the last 12 months or so.
“Whilst I expect other lenders will post reductions to their profits, those who have remained loyal to their existing customers by offering competitive rates I imagine will see a much smaller reduction to profits.
“A lesson here for all lenders, look after your existing clients with competitive renewal rates and they won’t walk out the door.
“Not an issue in good times but when new lending is almost non existent it comes in to much sharper focus.”
Tracey Dixon, broker at Pure Mortgage and Protection:
“Lloyds’ recent profit dip reflects a tough start to 2024 due to increased competition.
“However, their rising mortgage applications suggest a potential rebound in lending for the rest of the year.
“This could be a positive sign for borrowers looking for competitive rates and deals.
“Competition among lenders is likely to stay strong for the rest of 2024, which could benefit borrowers with potentially better deals and rates.
“While the Bank of England’s base rate remains steady, individual lenders may continue to adjust their fixed-rate mortgage offerings.
“Watch for continued innovation and competition, especially as lenders try to attract new customers.”
Elliot Cotterell, director at Windsor Hill Mortgages:
“The Lloyds results reflect a period within which the mortgage market was anticipating more aggressive rate cuts from the Bank of England derived from swap market projections.
“During this period, many slightly more aggressive lenders took this as an opportunity to slash rates in a bid to wrestle more market share.
“And it did work, for a spell, until it became apparent that stubborn inflation was not retreating as had been expected and as the market began to reflect this, lenders have since rapidly reversed their positions and most recently began to increase their rates and unwind their previously aggressive stance.
“We would anticipate that as interest rates do begin to come down that next time lenders might think twice before running ahead of themselves and take a more pragmatic stance.
“Moreover, with an election now on the horizon we would expect the market to pause for breath before finding it’s feet under a potentially likely new regime.”
Simon Bridgland, broker and director at Release Freedom:
“The brands of Lloyds Banking Group have been out of touch with their competitors for some time. For those chasing rates there have been more attractive deals available, but where they really lack is on how much they lend.
“There are far more generous lenders in the market and those that understand the needs of their applicants will win the business.
“Undoubtedly they have their reasons for reigning back on their new mortgage book but the market is needing a common sense approach to affordability, with more leniency given to those managing to service their commitments, on time, all the time.”
Gary Bush, financial adviser at MortgageShop.com:
“Lloyds Banking Group’s position, via its trading position as Halifax, is very much under attack by other lenders as we see Nationwide snapping up Virgin Money as a lender and more recently Coventry agreeing to purchase Coop Bank and its lending arm Platform.
“It seems the Building Society model is on the march on the UK’s historic largest mortgage lender, Halifax, which will affect their trading results.
“One observation from the front line of this mortgage war is that the bigger lenders should really be leading from the front rather than making sudden and painful rate increases and deal removals which damage consumers interests.
“After last year we thought that the worst of the mortgage market chaos was coming to an end, with the ideal start to 2024 we saw, what little we knew though – even with a decent and positive-looking set of data results we can only hope for lenders to see positivity as we move through the year.”
Riz Malik, director at R3 Mortgages:
“This comes as no surprise to those of us on the front line.
“The purchase market is dead and there is no confidence in the market. It would be less painful if all of my wisdom teeth erupted at the same time.
“Neither the government nor the Bank of England seem interested in getting things moving so we stay in limbo indefinitely.”
Darryl Dhoffer, adviser at The Mortgage Expert:
“In real terms this is a 30% reduction in profits for the UK’s largest lender, which probably bears resemblance of the percentage of NEW business written for the same period across the whole market – with volatile rates making a return, this could be a reflection of the same levels of written business this year – lets prey this is not the case, as will stagnate the market even further.”
Ken James, director at Contractor Mortgage Services:
“The fact that a big lender such as Lloyds Banking Group has made a loss should come as no surprise.
“Most mortgage brokers incomes will probably also be lower due to the fact that activity over the last year has been hit by all the challenges facing the UK economy right now.
“We did hope to be out of the woods as we entered into what seemed like a promising positive start to 2024 but as we are now seeing the increased swap rates are leading to lenders hiking up rates and the chances are that they will see another loss this year and they wont be the only ones suffering.”
