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Mortgage Lending in the UK - Key Trends and Opportunities to 2018

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Published Date : May 2014

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No. of Pages : 74 Pages


The report provides market analysis, information and insights into the UK mortgage lending market

  • It provides a snapshot of market size and market segmentation
  • It offers a comprehensive analysis of gross lending, approvals, balances outstanding, housing market drivers and market outlook
  • It analyzes distribution channels
  • It outlines deals, news and regulatory developments

Executive summary

Mortgage lending activity continued to grow during the recessionary review period, with gross lending rising at a compound annual growth rate (CAGR) of 5.24% during the review period (2009–2013), to a five-year high of GBP176.4 billion in 2013. The balance outstanding on a book of 13.96 million UK mortgage accounts stood at GBP1.28 trillion at the end of 2013.

Despite the contraction in economic growth, slow earnings growth, and a rise in unemployment and redundancies during the review period, demand for mortgages was supported by first-time buyers and buy-to-let investors. First-time buyers benefited from ongoing policy stimuli in the form of Help to Buy equity loans and a portion of high loan-to-value mortgages underwritten by the government. Buy-to-let lending was fuelled by easy access to interest-only loans and high yields in the rental market.

Mortgage affordability eased during the recession as the Bank of England reduced its policy interest rate to a record-low of 0.5% in 2009, and Funding for Lending provided 18 months of access to cheap bank finance. This prompted retail lenders to lower interest rates on tracker and fixed-rate mortgages during the review period, leading to lower-value loan repayments from 2009 onwards. At the same time, however, the availability of mortgages was stifled by a heightened wariness towards risk. Mortgages of over 95% loan-to-value accounted for just 0.5% of new approvals in 2013, compared to 5.7% in 2007.

Help to Buy is expected to be the primary driver of mortgage demand over the forecast period, but remains dependent on the government’s allocated funding lasting until the scheduled 2020 end date. The scheme has re-opened the market for buyers with small deposits and reinvigorated demand from home movers. Favorable government policy towards self-build projects, higher social housing tenant discounts for Right to Buy, and the inclusion of Sharia-compliant products in Help to Buy will aid the development of niche mortgage lending categories. Gross mortgage lending is forecast to rise at a CAGR of 6.11% over the forecast period (2014–2018), increasing balances outstanding to GBP1.35 billion in 2018.

While the immediate ability to repay mortgages is assisted by low interest rates, a tightening of monetary policy is inevitable as economic growth gains pace. Existing borrowers on fixed-rate deals will be protected against initial interest rate rises expected in late-2015, but concern over the affordability of repayments under a higher interest-rate scenario led the Financial Conduct Authority (FCA) to introduce remedial measures in the conclusion of its Mortgage Market Review in April 2014. Mortgage applicants will be subject to greater financial scrutiny, and stress tested against a rise in borrowing costs, potentially increasing delays and rejections, and impairing sentiment towards the home-buying process.

Growth in interest-only mortgage lending will be driven by the unregulated buy-to-let side of the market, as a ban on the self-certification of income and the requirement for a credible capital repayment plan is likely to deter homebuyers. The mortgage market will also have to contend with the withdrawal of Funding for Lending and a growing preference for renting, as well as the prospect of an International Monetary Fund (IMF)-approved cap on mortgage loan-to-value ratios, a move which has not been ruled out by Bank of England policymakers in the event of a nationwide housing market bubble.


This report provides market analysis, information and insights into the UK mortgage lending market

  • It provides a global snapshot of market size
  • It analyzes drivers and the outlook for the market
  • It provides information on distribution channels
  • It covers deals, news and regulatory developments

Reasons to buy

  • Gain an understanding of the UK mortgage lending market size
  • Learn about the performance of market drivers and distribution channels
  • Understand the competitive landscape in terms of market share and product innovation
  • Find out more on key deals and recent developments in the market

Key highlights

  • Growth in mortgage lending continued during the UK recession
  • Lackluster labor market conditions were outweighed by policy stimulus
  • Record-low interest rates resulted in more affordable repayments
  • Help to Buy will underpin demand for mortgages over the forecast period
  • The prospect of higher interest rates poses a threat to stability
  • Downside risk is intensified by Mortgage Market Review (MMR) bans and policy response in the event of a housing bubble
Table of contents

1 Executive Summary 

2 Introduction
2.1 What is this Report About? 
2.2 Definitions
2.3 Methodology 

3 Market Analysis 
3.1 Market Size
3.2 Gross Lending 
3.2.1 By lender 
3.2.2 By purpose 
3.3 Repayments 
3.4 Mortgage Approvals 
3.4.1 By value 
3.4.2 By volume 
3.4.3 Loan-to-value ratio 
3.4.4 Repayment and interest-only mortgages 
3.5 Mortgage Arrears
3.6 Interest Rates 
3.7 Market Outlook 
3.8 Distribution Channels 

4 Economic Backdrop 
4.1.1 Real GDP growth
4.1.2 Labor market conditions 
4.1.3 Housing market 
4.1.4 Disposable income 
4.1.5 Interest rates 

5 Competitive Landscape 
5.1 Market Shares 
5.2 Mortgage Interest Rates 
5.3 Mortgage Innovation 
5.4 Mortgages – SWOT Analysis 

6 Porter’s Five Forces Analysis
6.1 Bargaining Power of Suppliers: Medium–High 
6.2 Bargaining Power of Buyers: Low 
6.3 Barriers to Entry: Medium–High 
6.4 Intensity of Rivalry: High 
6.5 Threat of Substitution: Medium 

7 Regulation and Policy 
7.1 Recent Changes 
7.1.1 Help to Buy 
7.1.2 Mortgage Market Review (MMR) 
7.2 Upcoming Regulations 
7.2.1 Enhanced Product Sales Data requirements 
7.2.2 Mortgage Credit Directive 
7.2.3 Basel III 

8 Deals 
8.1 Post Office Opens Intermediary Distribution Channel 
8.2 Lloyds Banking Group Prepares to Float TSB 
8.3 Yorkshire Building Society Prices Euro Bond 
8.4 Nationwide Building Society Prices Offering Due in 2019

9 News 
9.1 Metro Bank Launches Online Mortgage System 
9.2 Nationwide Launches Video Link Mortgage Consultant Service 
9.3 One in 20 Brits Borrow to Make Rent or Mortgage Payments 
9.4 Higher Loan-to-Value Mortgages in Demand 
9.5 Mortgage Intermediaries Believe Help to Buy Will be Curtailed 
9.6 RICS Recommends Lenders Pay for Valuations 

10 UK Retail Banks 
10.1 Barclays Plc – Company Overview 
10.1.1 Barclays Plc – profile 
10.1.2 Barclays Plc – main mortgage products
10.1.3 Barclays Plc – main competitors 
10.1.4 Barclays Plc – board of directors 
10.2 HSBC Bank Plc – Company Overview 
10.2.1 HSBC Bank Plc – profile 
10.2.2 HSBC Bank Plc – main mortgage products 
10.2.3 HSBC Bank Plc – main competitors
10.2.4 HSBC Bank Plc – board of directors
10.3 Lloyds Banking Group Plc – Company Overview 
10.3.1 Lloyds Banking Group Plc – profile 
10.3.2 Lloyds Banking Group Plc – main mortgage products
10.3.3 Lloyds Banking Group Plc – main competitors 
10.3.4 Lloyds Banking Group Plc – board of directors
10.4 Nationwide Building Society – Company Overview 
10.4.1 Nationwide Building Society – profile 
10.4.2 Nationwide Building Society – main mortgage products 
10.4.3 Nationwide Building Society – main competitors 
10.4.4 Nationwide Building Society – board of directors 
10.5 Santander UK Plc – Company Overview
10.5.1 Santander UK Plc – profile 
10.5.2 Santander UK Plc – main mortgage products 
10.5.3 Santander UK Plc – main competitors
10.5.4 Santander UK Plc – board of directors 
10.6 The Royal Bank of Scotland Group – Company Overview 
10.6.1 The Royal Bank of Scotland Group Plc – profile 
10.6.2 The Royal Bank of Scotland Group Plc – main mortgage products 
10.6.3 The Royal Bank of Scotland Group Plc – main competitors 
10.6.4 The Royal Bank of Scotland Group Plc – board of directors 

11 Statistics 
11.1 Review Period: 2009–2013 
11.2 Forecast Period: 2014–2018 

12 Appendix 
12.1 Methodology 
12.2 Contact Timetric 
12.3 About Timetric 
12.4 Timetric’s Services 
12.5 Disclaimer

List of Table

Table 1: Mortgage Market Definitions 
Table 2: The UK – Mortgage Market Summary (GBP Billion), 2009–2013 
Table 3: The UK Mortgage Market – Competitor APR (%), Financial Year 2014/15 
Table 4: The UK Mortgage Market – SWOT Analysis 
Table 5: Recent and Upcoming Regulatory Changes 
Table 6: Barclays Plc, Key Facts 
Table 7: Barclays Plc, Main Mortgage Products 
Table 8: Barclays Plc, Board of Directors
Table 9: HSBC Bank Plc, Key Facts
Table 10: HSBC Bank Plc, Main Mortgage Products
Table 11: HSBC Bank Plc, Board of Directors 
Table 12: Lloyds Banking Group Plc, Key Facts 
Table 13: Lloyds Banking Group Plc, Main Mortgage Products 
Table 14: Lloyds Banking Group Plc, Board of Directors 
Table 15: Nationwide Building Society, Key Facts 
Table 16: Nationwide Building Society, Main Mortgage Products 
Table 17: Nationwide Building Society, Board of Directors 
Table 18: Santander UK Plc, Key Facts
Table 19: Santander UK Plc, Main Mortgage Products 
Table 20: Santander UK Plc, Board of Directors 
Table 21: The Royal Bank of Scotland Group Plc, Key Facts 
Table 22: The Royal Bank of Scotland Group Plc, Main Mortgage Products 
Table 23: The Royal Bank of Scotland Plc, Board of Directors 
Table 24: The UK – Mortgages Market (GBP Billion), 2009–2013 
Table 25: The UK – Mortgages Market (GBP Billion), 2014–2018

List of Chart

Figure 1: UK Mortgages – Balance Outstanding (GBP Billion), 2007–2013 
Figure 2: UK Mortgages – Outstanding Mortgage Loan Accounts (Million), 2007–2013 
Figure 3: UK Mortgages – Gross Lending (GBP Billion), 2008–2013 
Figure 4: UK Mortgages – Gross Lending by Lender (GBP Billion), 2008–2013 
Figure 5: UK Mortgages – Share of Gross Lending by Purpose (%), 2013 
Figure 6: UK Mortgages – Gross Lending for House Purchases (GBP Billion), 2007–2013 
Figure 7: UK Mortgages – Repayments (GBP Billion), 2008–2013 
Figure 8: UK Mortgages – Net Lending (GBP Billion), 2008–2013 
Figure 9: UK Mortgages – Approvals by Value (GBP Billion), 2008–2013 
Figure 10: UK Mortgages – Approvals by Value Breakdown (GBP Billion), 2008–2013 
Figure 11: UK Mortgages – Approvals by Volume (Thousands), 2008–2013 
Figure 12: UK Mortgages – Approvals by Volume Breakdown (Thousands), 2008–2013 
Figure 13: UK Mortgages – Approvals by Loan-to-Value (%), 2007–2013
Figure 14: UK Mortgages – Repayment and Interest-Only Advances (%), 2007–2013 
Figure 15: UK Mortgages – Outstanding Arrears Cases (GBP Billion), 2007–2013 
Figure 16: The UK – New Cases of Lender Repossessions, 2008–2013
Figure 17: The UK – Average Mortgage Interest Rates (%, End-year), 2008–2013 
Figure 18: The UK – Regional House Prices (GBP), 2007–2013 
Figure 19: UK Mortgages – Gross Lending (GBP Billion), 2014–2018 
Figure 20: UK Mortgages – Balances Outstanding (GBP Billion), 2014–2018 
Figure 21: The UK – Retail Savings Market Growth Dynamics (%), 2009–2018 
Figure 22: The UK – Mortgage Distribution Channels, 2005–2012 
Figure 23: The UK – Real GDP Growth (%), 2008–2018 
Figure 24: The UK – Unemployment and Redundancy Rates (%), 2004–2012 
Figure 25: The UK – Average Weekly Earnings (GBP), 2004–2013 
Figure 26: The UK – Housing Construction Growth (%), 2004–2013 
Figure 27: The UK – Average House Prices (GBP), 2004–2013 
Figure 28: The UK – Average House Prices by Type of Buyer (GBP), 2004–2013 
Figure 29: The UK – Annual House Price-to-Earnings Ratio (%), 2004–2013 
Figure 30: The UK – Household Disposable Income (GBP), 1997–2013 
Figure 31: The UK – Bank of England Rate (%), 2004–2014
Figure 32: Mortgage Balances Outstanding – Market Shares of the 10-Largest Mortgage Lenders in the UK (%), 2013 
Figure 33: Mortgage Gross Lending – Market Shares of the 10-Largest Mortgage Lenders in the UK (%), 2013 
Figure 34: The UK Mortgage Market – Five Forces Analysis 
Figure 35: The UK – Banking Regulatory Framework

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