Specialist home lenders saw business rise in 2017, new analysis shows

Specialist home lenders in the UK are taking a bigger share of the mortgage market while the largest are seeing more modest growth, a new analysis of property finance shows.

Last year there was increased completion for business although overall lending was down by 4% compared with 2016, according to the mortgage report from UK Finance, which represents 97% of the home lending market.

Growth in new lending was strongest amongst lenders ranked 21 to 30 in 2017, who lent £3 billion more for housing than in the previous year, a growth rate of 40%.

Although Lloyds, which tops the lending table, has continued to increase lending activity with a 7% rise compared to 2016, the next three lenders on the table, the Nationwide Building Society, the Royal Bank of Scotland and Santander, all saw lower volumes than in 2016, compared to the previous year and corresponding contractions in market share.

Despite this, there was no change in the top 10 gross lending table, with all lenders retaining the same rankings as in 2016.

However, there was movement in those ranked 11 to 20. Paragon climbed from 21st to 19th with a 78% increase in lending activity and Legal and General also made a sizeable jump, moving from 27th to 23rd place following a 6% increase in lending.

Other lenders with significant lending growth include Tesco Bank up 71%, Metro Bank up 50%, Foundation Home Loans up 200% and Pepper UK also up 200%.

Looking at the table on a sectoral basis, it shows that whilst all types of lenders did see an increase in their lending overall, it is the challenger banks and specialist lenders who are doing the most new business proportionately with almost a 20% increase in activity.

UK Finance says that 2017 was a good year for the mortgage market with more lenders competing for business, and gross lending continuing on an upward trend.

In its most recent market forecasts UK Finance predicts gross lending of £260 billion in 2018, an increase of about 2%. Lending in the early months of 2018 has, so far, outpaced the forecasts, driven largely by stronger than expected remortgage activity.

But it warns that uncertainties set out last year continue, not least those relating to the British economy, and these have the potential to affect the path of lending for the rest of this year and beyond.

‘However, the market has shown this year that, yet again, it is competitive and robust enough to continue to help UK mortgage customers as their needs change,’ it concludes.